The Price of a European Put Option on Potash Corp

question 71

Multiple Choice

The price of a European put option on Potash Corp stock with an exercise price of $48 and one year to expiry is trading at $4.15.The current price of the stock is $45,and the risk-free rate is 3%.With no arbitrage,what must be the price of a European call on Potash Corp with an exercise price of $48?

• A)$2.55
• B)$5.75
• C)$3.00
• D)$2.91
• E)$0.16

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Definitions:

Sternocleidomastoid Muscle

A muscle in the neck that runs from the sternum and clavicle to the mastoid process of the temporal bone, involved in the rotation and flexion of the head.

Sternal End

The end of a bone that is closest to the sternum, often referring to the ends of the ribs or the clavicle.

Insertion

The point or mode of attachment of a skeletal muscle to the bone or other body part it moves.

Orbicularis Oris

A complex of muscles in the lips that encircles the mouth, controlling the movements involved in lip closure, puckering, and speech.