The Price of a European Call Option on RBC Stock

question 66

Multiple Choice

The price of a European call option on RBC stock with an exercise price of $85 and one year to expiry is trading at $3.15.The current price of the stock is $81.25,and the risk-free rate is 2.5%.With no arbitrage,what must be the price of a European put on RBC with an exercise price of $85?

• A)$4.83
• B)$3.15
• C)$1.47
• D)$4.71
• E)$2.59

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Definitions:

Operant Conditioning

A method of learning that employs rewards and punishments for behavior, leading to changes in voluntary behavior.

Classical Conditioning

A conditioning technique where, through repeated associations, a response at first elicited by a second stimulus is in the end elicited by the first stimulus without the second.

Reinforcer

An element in behaviorist psychology that strengthens a behavior or increases the likelihood of its repetition.

Cognitive Learning

A style of learning that involves understanding, thinking, problem-solving, and remembering, by which knowledge is gained and retained.