A Put Option That Expires in Eight Months with an Exercise

question 56

Multiple Choice

A put option that expires in eight months with an exercise price of $57 sells for $3.85.The stock is currently priced at $59,and the risk-free rate is 3.1 percent per year,compounded continuously.What is the price of a call option with the same exercise price and expiration date?

• A)$6.67
• B)$7.02
• C)$7.34
• D)$7.71
• E)$7.80

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Definitions:

Income

The money received by an individual or group for their labor, investments, or other revenue-generating activities.

Progressive Tax Structure

A tax system in which the tax rate increases as the taxable amount or income increases, imposing a higher percentage rate on higher income earners.

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