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

question 56

Multiple Choice

Consider a one-year maturity call option and a one-year put option on the same stock, both with striking price $100. If the risk-free rate is 5%, the stock price is $103, and the put sells for $7.50, what should be the price of the call?

• A) $17.50
• B) $15.26
• C) $10.36
• D) $12.26
• E) None of the options.

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Definitions:

"Ghost" In Machine

A metaphor denoting the consciousness or mind present within the physical body, especially in philosophical discussions about mind-body dualism.

Brain As Machine

The metaphorical concept comparing the brain's functions and processes to those of a machine, focusing on computational and mechanistic approaches to understanding cognition.

Motor Functions

Activities related to the movement of muscles including actions like grasping, walking, and speaking.

Reflex Arc

A neural pathway that controls an action reflex, involving a sensory neuron, a motor neuron, and typically an interneuron, to facilitate a quick automatic response to stimuli.