The Price of a Call Option on Microsoft Stock with a Maturity

question 109

Multiple Choice

The price of a call option on Microsoft stock with a maturity of six months and a strike price of $40 is $3.50,and the price of the stock is $38.50.The price of a put option on the same stock with the same strike price and time to maturity is $1.25.Calculate the risk-free rate.

• A)6.36%
• B)9.33%
• C)1.99%
• D)18.52%
• E)10.34%

Understand the principles and consequences of public finance including taxation, government expenditure, and borrowing.

Comprehend the structure of federal tax revenues by source and the significance of these sources.

Clarify the concepts of marginal tax rates, deficit spending, and their implications for fiscal policy.

Understand the structure of tax revenues and the primary sources of tax income for the U.S. federal government.

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Definitions:

Corporate Securities

Refers to financial instruments issued by corporations, such as stocks and bonds, representing an ownership stake or a debt obligation.

Ponzi Scheme

A fraudulent investing scam promising high rates of return with little risk to investors, which generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities.

Sarbanes-Oxley Act

An act that criminalizes specific nonaudit services when provided by a registered accounting firm to an audit client; also increases the punishment for a number of white-collar offenses. Also known as the Public Company Accounting Reform and Investor Protection Act of 2002.

Investment Company Act

A U.S. federal law enacted in 1940 aimed at regulating investment companies to protect investors by enforcing transparency and reducing conflicts of interest.