The Current Stock Price Is $100

question 18

Multiple Choice

The current stock price is $100.A $101--strike call option is priced at $7.55.The risk-free one-month rate of interest is 1% in continuously-compounded and annualized terms.Using the Derman-Kani (1994) tree technology for a single period,what is the price of the one-month at-the-money put option?

• A)$6.12
• B)$6.34
• C)$7.55
• D)$7.92

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Definitions:

AASB 11

Australian Accounting Standards Board pronouncement governing the accounting for arrangements between parties that are collectively controlling an economic activity.

Jointly Controlled Entities

Businesses owned and operated by two or more parties who share control and decisions, typically structured through contractual arrangements.

Contractual Agreement

This is a legally binding agreement between two or more parties with mutual obligations, often delineated in a document.

Tenants in Common

A form of co-ownership where each owner has an individual, undivided interest in the property, and upon death, their share passes to their estate rather than the other co-owners.