A Stock Is Selling for $45

question 51

Multiple Choice

A stock is selling for $45.75 with a put option available at a $50 strike that has a premium of $7.50. What is the speculative premium of the put?

• A)$4.25
• B)$1.25
• C)$3.25
• D)$5.25
• E)$7.50

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Definitions:

Passive Investments

Investments in which the investor does not actively manage or influence the operation of the asset, such as stocks or mutual funds.

Equity Securities

Financial instruments representing ownership interest in a company, such as stocks, which can yield dividends and capital gains.

Goodwill

An accounting value assigned to the reputation, customer loyalty, or other factors enabling a business to earn higher profits than expected from its assets alone.

Consolidated Balance Sheet

A financial statement showing the aggregated financial position of a parent company and its subsidiaries.