A Stock Is Currently Selling for $40

question 100

Multiple Choice

A stock is currently selling for $40.85.A 3-month call option with a strike price of $40 has an option premium of $1.30.The risk-free rate is 2 percent and the market rate is 9.5 percent.What is the option premium on a 3-month put with a $40 strike price? Assume the options are European style.

• A)$0.00
• B)$0.05
• C)$0.15
• D)$0.25
• E)$0.35

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Definitions:

Customizing Department

A department within a manufacturing or service firm dedicated to modifying products or services according to customer specifications.

Job T898

A specific reference or identifier for a job or order within a job-order costing system, used for tracking costs and production progress.

Predetermined Overhead Rate

A rate calculated before a production period that estimates the amount of manufacturing overhead cost per unit of allocation base, used to apply overhead costs to goods produced.

Casting Department

A specific section within a manufacturing facility where the process of casting—shaping material by pouring it into a mold and allowing it to solidify—is performed.