Use the Following Information to Answer the Question(s)below

question 3

Multiple Choice

Use the following information to answer the question(s) below.
Consider an American put option on Rearden Metal stock with a strike price of $60 and one year to expiration.Assume that Rearden pays no dividends,its stock is currently trading at $15 per share,and the one-year interest rate is 5%.Also assume that it is optimal to exercise this put option early.
-The maximum value of a one-year American call option on Rearden Metal with a strike price of $60 per share is closest to:

• A)$0.
• B)$1.84.
• C)$2.48.
• D)$2.86.

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Definitions:

Household Income

The total income earned by all members of a household, including wages, investments, and any other sources of income.

Proportion

A part, share, or number considered in comparative relation to a whole; often expressed as a fraction or percentage.

Sample

A subset of a larger population, selected for the purpose of conducting statistical analysis or experimentation.

Parameter

A quantity that characterizes a statistical population and can be estimated by a function of the sample data.