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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. )


Definitions:

Implicit

Information or knowledge that is understood or implied without being directly stated or consciously recognized.

Explicit

Referring to knowledge or information that is fully and clearly expressed or demonstrated, leaving no room for confusion or doubt.

External

Relating to, situated on, or connected with the outside or an outer part.

Orbital Frontal Cortex

A region of the brain located in the frontal lobes that is involved in the complex process of decision making and moderating social behavior.

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