A Stock Is Valued at $53

question 106

Multiple Choice

A stock is valued at $53.90 a share. A European 3-month call option has a strike price of $52 and an option premium of $2.50. The market rate is 8.5% and the risk-free rate is 1.25%. What is the price of a European 3-month put option with a $52 strike price?

• A)$0
• B)$.44
• C)$.40
• D)$.48
• E)$.61

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Definitions:

Implied Warranty

A legal term for the assurance that a product is fit for its intended purpose, even if not explicitly stated at the time of sale.

Commercial Purposes

Activities or transactions conducted with the goal of generating profit or involving the buying and selling of goods and services.

Implied Warranties

Warranties that are not expressly stated but are assumed by law to exist in a sales contract to protect the buyer.

Common Law

A legal system grounded in established precedents and traditions, not on written statutes.