A Futures Price Is Currently 40 Cents

question 8

Multiple Choice

A futures price is currently 40 cents.It is expected to move up to 44 cents or down to 34 cents in the next six months.The risk-free interest rate is 6%.What is the value of a six month call option with a strike price of 39 cents?

• A) 5.00 cents
• B) 2.91 cents
• C) 3.00 cents
• D) 4.21 cents

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Definitions:

3,000 Rpm

Refers to an engine speed of 3,000 revolutions per minute, often used to measure engine or machinery performance.

Trunnion Seals

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Rosebud

A type of torch tip used in welding and cutting applications, named for its rose petal-like flame pattern, commonly used for heating.

Forged Journal Cross

A forged journal cross is a component in the driveline of a vehicle, made through forging to achieve strength and durability, used to connect different shafts within the drive system.