A Call Option with 60 Days to Maturity,exercise Price of $12.00,underlying

question 18

Multiple Choice

A call option with 60 days to maturity,exercise price of $12.00,underlying spot price of $14.00 and risk-free rate of 7% p.a.is valued at $2.20.What is the value of a put option with the same characteristics? (Assume the call option premium is correctly priced and there are no dividends. )

• A) \( \$ 0.02 \)
• B) \( \$ 0.06 \)
• C) \( \$ 0.07 \)
• D) \( \$ 0.08 \)

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Definitions:

Hornfels

A hard, fine-grained metamorphic rock formed by the contact metamorphism of clay-rich or silicate rocks.

Thrust Fault

A type of fault in which the upper block, above the fault plane, moves up and over the lower block.

Anticline

A type of fold in sedimentary rocks that resembles an arch, with the oldest rock layers at its core, indicative of compressional tectonic forces.

Syncline

a downward-curving (trough-like) fold in rock layers where the youngest materials are at the center.