A Stock Price (Which Pays No Dividends)is $50 and the Strike

question 5

Multiple Choice

A stock price (which pays no dividends) is $50 and the strike price of a two year European put option is $54.The risk-free rate is 3% (continuously compounded) .Which of the following is a lower bound for the option such that there are arbitrage opportunities if the price is below the lower bound and no arbitrage opportunities if it is above the lower bound?

• A) $4.00
• B) $3.86
• C) $2.86
• D) $0.86

---

Definitions:

Startups

Entrepreneurial ventures that aim to meet a marketplace need by developing or offering an innovative product, process, or service.

Fails

Mistakes or unsuccessful attempts that result in a lack of achievement of an intended objective.

Flashy

Something that is visually striking or showy, often used to attract attention but may lack substance.

Cluttered

Describes an environment or space filled with a disorderly excess of objects, making it difficult to use or navigate efficiently.