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

---

Definitions:

Planning Budget

A financial plan that estimates the income and expenditures for a future period, often used as a guide for financial decision making.

Revenue

The income generated from normal business operations and includes discounts and deductions for returned merchandise.

Flexible Budget

A budget that adjusts or flexes with changes in the volume or activity level.

Static Planning Budget

A budget based on a fixed level of activity and does not change in response to variations in the actual level of activity.