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

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Definitions:

Clayton Act

A piece of antitrust legislation in the United States, passed in 1914, aimed at promoting competition among businesses by prohibiting certain practices that restrict competition.

Antitrust Amendments

Modifications made to laws that regulate competition among businesses, intended to prevent monopolies and promote fair competition.

Retailer

A business or person that sells goods directly to consumers, acting as the final link in the distribution chain from manufacturers to end users.

Robinson-Patman Act

A federal law in the United States that bans practices by producers that hinder competition, particularly discriminating in pricing.