Calculate the Price of a European Call Option If the Price

question 28

Multiple Choice

Calculate the price of a European call option if the price of the equivalent European put option is $5 and the share price,exercise price and risk-free rate (continuously compounded) are $31,$28 and 12% p.a. ,respectively.The options have three months to expiry.

• A)$1.17
• B)$8.83
• C)$8.82
• D)$9.63
• E)$1.18

---

Definitions:

Formal Games

Activities governed by a set of rules or customs and often engaged in competitively.

Power Assertion

A disciplinary technique that involves the use of authority or physical power to enforce rules and correct misbehavior.

Induction

The process of initiating childbirth artificially through medical interventions such as medication or breaking the water.

Solitary Play

A stage of play development where a child plays alone, focusing on their activities without seeking interaction with others.