The Price of a Stock Is $40

question 75

Multiple Choice

The price of a stock is $40. There are both call and put options on this stock. Both options have an exercise price of $40 and expire in two months. The market return is 10% and the risk-free rate is 4%. Given this, you know the

• A) Call option must be worthless
• B) Put option must be worthless
• C) Call option price is greater than the put option price
• D) Put option price is greater than the call option price
• E) Both (A) and (B)

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Definitions:

Genus

In the system of plant and animal classification, a group of like species.

Mousterian Tools

Stone tools associated with Neanderthal cultures, known for their specific flaking technique.

Neandertal

An extinct species of human characterized by robust physical features, known to have lived in Europe and parts of Asia until about 40,000 years ago.

Homo Erectus

An extinct species of early human that lived from approximately 2 million to roughly 100,000 years ago, known for being one of the first hominins to use fire and sophisticated tools.