A Call Option with a $35 Strike Price on Bavarian

question 86

Multiple Choice

A call option with a $35 strike price on Bavarian Sausage stock will expire in one year.If you know that the risk free rate is 6%,that the stock currently sells at $38 and the put on the same stock has a value of $3.85,what is the price of the call?

• A) $3.85
• B) $6.26
• C) $7.34
• D) $8.83

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Definitions:

Sellers

People or organizations that make products or provide services available for purchase in the marketplace.

Tax Per Unit

A tax imposed on each unit of a good or service produced or sold, often used by governments to generate revenue or discourage consumption.

Tax

A mandatory monetary contribution or different kinds of charges laid on a taxpayer by government institutions to support government expenses and diverse public costs.

Buyers Pay

The amount of money that purchasers spend to acquire goods or services.