A Put Option with a $50 Strike Price on Bavarian

question 9

Multiple Choice

A put option with a $50 strike price on Bavarian Sausage stock will expire in one year.If you know a call on the same stock has a value of $2.75,that the price of the put is $1.26 and the stock is currently selling at $47,what is the implied risk free rate?

• A) 4.56%
• B) 3.07%
• C) 5.43%
• D) 9.87%

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Definitions:

Oral Stage

In psychoanalytic theory, the first stage of psychosexual development, where the mouth is the primary source of gratification.

Defense Mechanism

Psychological strategies employed by individuals to cope with reality and maintain self-image by unconsciously denying or distorting reality.

Reaction Formation

A psychological defense mechanism in which a person unconsciously replaces unacceptable thoughts or feelings with their opposites.

Phallic Stage

A phase in Freud's psychosexual development theory, occurring from about ages 3 to 6, where the libido's focus is on the genital area.