A 4-Month,$25 Call Option on Teller Stock Has an Option

question 3

Multiple Choice

A 4-month,$25 call option on Teller stock has an option premium of $0.25.The 4-month,$25 put option has an option premium of $0.80.The risk-free rate is 3 percent.The options are European-style.What is the price of Teller stock?

• A) $24.20
• B) $24.53
• C) $24.62
• D) $25.97
• E) $26.08

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Definitions:

Erosion

The process by which soil, rock, and other surface material are worn away by wind, water, or other natural agents.

Combustion

A chemical reaction that occurs when a substance reacts with oxygen to produce heat and light, commonly seen in burning.

Carbon Dioxide

A clear, scentless gas that is a byproduct of burning carbon-based substances and the respiration process, which is utilized by plants during the process of photosynthesis.

Terrestrial

Terrestrial refers to organisms or environments that are land-based, as opposed to aquatic or marine.