Consider the Case of an Exchange Option in Which the Underlying

question 3

Multiple Choice

Consider the case of an exchange option in which the underlying stock is Eli Lilly and Company with a current price of $56.00 per share.The strike asset is Merck,with a per share price of $52.00.Interest rates are 5% and the 3-month call option is trading for $7.00.What is the price of the put?

• A) $3.00
• B) $4.00
• C) $7.00
• D) $11.00

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Definitions:

Distribution Costs

Expenses related to the process of delivering products from production to the end consumer, including storage, inventory, and transportation costs.

Wholesalers

Individuals or businesses that buy large quantities of products from manufacturers or distributors and then sell smaller quantities to retailers.

Measurable

Capable of being quantified or expressed in numerical terms, allowing for assessment or comparison.

Purchasing Power

A measure of the amount of goods and services that can be purchased for a specific amount of money.