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

question 15

Multiple Choice

A call option with 60 days to maturity,exercise price of $12.00,underlying spot price of 14.00 p.a.is valued at $2.24.If the put option with these characteristics is trading at $0.06,at what risk-free rate will put-call parity hold? (Assume the call option premium is correctly priced and there are no dividends. )

• A) \( 5 \% \)
• B) \( 6 \% \)
• C) \( 7 \% \)
• D) \( 8 \% \)

---

Definitions:

Interest Allowance

An amount that reduces the gross interest income earned, related to the cost of borrowing or credit facilities.

Income Summary

An account used in the closing process during accounting that accumulates revenues and expenses to determine net income or loss.

Net Loss

The amount by which total expenses exceed total revenues for a business during a specific period, indicating a reduction in equity.

Salary Allowances

Compensation or benefits on top of regular salary, often for specific purposes like housing, travel, or meals.