What Is the Call Option Premium Given the Following Information

question 60

Multiple Choice

What is the call option premium given the following information?

• A) $3.91
• B) $4.28
• C) $4.71
• D) $4.90
• E) $5.13

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Definitions:

Expected Rate of Return

The anticipated amount of profit or loss an investment is projected to generate over a specific period, expressed as a percentage.

Portfolio of Risky Securities

A collection of investments that contain a degree of risk, with the expectation of achieving higher returns compared to risk-free assets.

Weighted Sum

A mathematical technique where each component is multiplied by a factor reflecting its importance before their sum is computed.

Variance of Returns

A measure of the dispersion of returns for a given security or market index, typically used to gauge the risk associated with a particular investment.