A European Call Option on a Stock Has an Exercise

question 31

Multiple Choice

A European call option on a stock has an exercise price of $50, is selling for $6.50, and has 3 months to expiration. The stock itself is currently selling for $53.38. The annualized risk-free
Rate is 3%. If the call option is fairly priced, what is the fair price of a European put option on
This stock that has the same strike price and time to expiration?

• A)$1.66
• B)$2.75
• C)$11.34
• D)$10.25

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Definitions:

Gainsharing

A system where employees are rewarded based on the performance improvements or financial gains of their company.

Scientific Management

Early 20th century theory introduced by Frederick Taylor and his colleagues that analyzes workflow through systematic observation or reasoning.

Job Design Management

Involves structuring job roles, tasks, and responsibilities in a way that maximizes employee efficiency and satisfaction, considering factors such as autonomy and variety.

Systematic Management

An approach to management that focuses on processes and procedures, emphasizing efficiency, standardization, and the overall coordination of all parts of an organization to achieve its objectives.