A Stock Is Selling for $60 Per Share

question 18

Multiple Choice

A stock is selling for $60 per share.A call option with an exercise price of $65 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)$5.99
• B)$6.23
• C)$6.47
• D)$7.21
• E)$8.94

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Definitions:

Oligopsony

Market with only a few buyers.

Buying Price

The price at which a good or service is purchased by a consumer or another business.

Marginal Value Curve

The marginal value curve represents how the value of the last unit consumed (marginal value) changes as the quantity consumed increases.

Marginal Expenditure

The extra expense that results from acquiring or making an additional unit of a product or service.