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:

Neuroticism

A personality trait characterized by feelings of anxiety, fear, moodiness, worry, envy, frustration, jealousy, and loneliness.

Die

To cease living; the end of life in organisms.

Association

In psychology, refers to a connection or link between two ideas, events, or psychological phenomena, suggesting a relationship where one may influence or evoke the other.

Neuroticism

A personality trait characterized by anxiety, fear, moodiness, worry, envy, frustration, jealousy, and loneliness.