When the Non-Dividend Paying Stock Price Is $20,the Strike Price

question 15

Multiple Choice

When the non-dividend paying stock price is $20,the strike price is $20,the risk-free rate is 6%,the volatility is 20% and the time to maturity is 3 months which of the following is the price of a European call option on the stock

• A) 20N(0.1)-19.7N(0.2)
• B) 20N(0.2)-19.7N(0.1)
• C) 19.7N(0.2)-20N(0.1)
• D) 19.7N(0.1)-20N(0.2)

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Definitions:

Profit-Maximizing Output

The level of production at which a firm achieves the highest possible profit, determined by the point where marginal cost equals marginal revenue.

Purely Competitive Market

Describes a theoretical market structure featuring many buyers and sellers of a homogeneous good or service, with no single party able to manipulate prices due to the absence of market control.

Cost Data

Information about the expenses incurred in the production of goods or services.

Market Price

The price at which a good or service is offered in the marketplace.