A Stock Is Selling for $60 Per Share

question 45

Multiple Choice

A stock is selling for $60 per share. A call option with an exercise price of $67 sells for $3.31 and expires in 4 months. The risk-free rate of interest is 2.8 percent per year, compounded continuously. What is the price of a put option with the same exercise price and expiration date?

• A)$8.99
• B)$9.23
• C)$9.47
• D)$9.69
• E)$9.94

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Definitions:

Consideration

A fundamental element of a contract, referring to something of value exchanged between parties, such as services, goods, or money.

Contractual Capacity

The legal ability to enter into a binding agreement.

Agency Relationship

represents a legal arrangement where one party, the agent, acts on behalf of another party, the principal, in dealing with third parties.

Express Authority

Explicitly given power or authority to an agent or representative by a principal to perform specific acts or functions on their behalf.