Consider a One-Year Maturity Call Option and a One-Year Put

question 47

Multiple Choice

Consider a one-year maturity call option and a one-year put option on the same stock, both with striking price $45. If the risk-free rate is 4%, the stock price is $48, and the put sells for $1.50, what should be the price of the call?

• A) $4.38
• B) $5.60
• C) $6.23
• D) $12.26
• E) None of the options.

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Definitions:

Percent Less

A term used to indicate a reduction or discount applied to a price or value, expressed as a percentage of the original amount.

Percent More

A comparative measure indicating how much higher one quantity is than another, expressed as a percentage.

Percent Change

The measure of the degree of change of a quantity, expressed as a percentage.

Nitrogen Fertilizer

A type of fertilizer that is high in nitrogen content, used to enhance soil fertility and stimulate plant growth.