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:

Language Comprehension

The ability to understand spoken or written language and extract meaning from it.

Wernicke's Area

A region of the brain, located in the temporal lobe, critical for the comprehension of spoken language.

Broca's Area

A region in the frontal lobe of the brain associated with speech production and language processing.

Temporal Lobe

A region of the brain located beneath the lateral fissure, involved in processing sensory input into derived meanings for the appropriate retention of visual memory, language comprehension, and emotion association.