For a European Put Option on an Index,the Index Level

question 11

Multiple Choice

For a European put option on an index,the index level is 1,000,the strike price is 1050,the time to maturity is six months,the risk-free rate is 4% per annum,and the dividend yield on the index is 2% per annum.How low can the option price be without there being an arbitrage opportunity?

• A) $50.00
• B) $43.11
• C) $29.21
• D) $39.16

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Definitions:

Triangles

Geometric figures with three sides and three angles.

Angles

A measure of the turn between two lines meeting at a point, usually measured in degrees or radians.

Augmented Matrix

In linear algebra, an augmented matrix is obtained by appending the columns of two or more matrices, typically for the purpose of performing the same elementary row operations on each matrix.

Order

In mathematics, the arrangement or sequence of objects or numbers according to a specific rule, or the degree of a polynomial or differential equation.