A Stock Is Currently Selling for $48

question 101

Multiple Choice

A stock is currently selling for $48. A 4-month put option on the stock with a strike price of $50 is available for $3.60. The risk-free rate is 4.5% and the market rate is 11%. What is the option premium for a 4-month call with a $50 strike price? Assume the options are European style.

• A) $2.19
• B) $3.42
• C) $3.76
• D) $0.86
• E) $2.33

---

Definitions:

Internal Accounting Systems

The set of procedures and records that a company's management uses for financial planning, analysis, and decision making within the company.

Dysfunctional Results

Outcomes of processes or activities that negatively affect the goals or functioning of an organization.

External Failure Cost

Costs incurred when a defective product or service is discovered after delivery to the customer, including returns, repairs, and lost sales.

Prevention Costs

Costs incurred to prevent defective units before they are produced. For example, reengineering products or production processes.