Tru-U Stock Is Selling for $36 a Share

question 65

Multiple Choice

Tru-U stock is selling for $36 a share.A 3-month call on Tru-U stock with a strike price of $40 is priced at $1.Risk-free assets are currently returning 0.15 percent per month.What is the price of a 3-month put on Tru-U stock with a strike price of $40?

• A)$2.98
• B)$3.00
• C)$4.03
• D)$4.70
• E)$4.82

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Definitions:

Sales Revenues

The total amount generated from selling goods or services before any expenses are subtracted.

Cash Operating Costs

The expenses a company incurs during its normal business operations that require cash payments, such as rent, utilities, and payroll.

Annual Depreciation

The portion of the cost of a fixed asset that is allocated as an expense in each accounting period during its useful life.

Simple Rate of Return

A financial metric used to evaluate the profitability of an investment, calculated as the annual incremental net operating income divided by the initial investment cost.