A Call Option Has a Premium of $3

question 16

Multiple Choice

A call option has a premium of $3.10, a strike price of $55, and 2 months to expiration. The current stock price is $52.20. The stock will pay a $1.25 dividend in one month. The risk-free rate is 2.5 percent. What is the premium on a 2-month put with a strike price of $55? Assume the options are European style.

• A) $2.08
• B) $2.15
• C) $3.32
• D) $4.12
• E) $6.92

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