A Call Option Has a Price of $4 $0$

question 8

Multiple Choice

A call option has a price of $4.50 with exercise price of $14.00 and underlying asset price of $15.00.If the time to maturity is 60 days and the risk-free return is 7% p.a. ,what is the pricing bounds error?

• A) \( 0 \)
• B) \( 0.50 \)
• C) \( 0.66 \)
• D) \( 1.16 \)

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Definitions:

True Zero Point

In measurement scales, a true zero point indicates the absence of the quantity being measured, allowing for ratios to be meaningfully calculated.

Interval Level Variables

Interval level variables are a type of quantitative data where the intervals between values are meaningful, but the data lack a true zero point, allowing for the measurement of difference but not ratio.

Ratio Level Variables

Variables that have a true zero point and can be compared in terms of multiples.

Categorical

Pertaining to data or variables that represent categories, qualities, or characteristics without inherent numerical value.