The Price of a European Call Option on a Stock

question 6

Multiple Choice

The price of a European call option on a stock with a strike price of $50 is $6.The stock price is $51,the continuously compounded risk-free rate (all maturities) is 6% and the time to maturity is one year.A dividend of $1 is expected in six months.What is the price of a one-year European put option on the stock with a strike price of $50?

• A) $8.97
• B) $6.97
• C) $3.06
• D) $1.12

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