The Price of a European Call Option on RBC Stock

question 66

Multiple Choice

The price of a European call option on RBC stock with an exercise price of $85 and one year to expiry is trading at $3.15.The current price of the stock is $81.25,and the risk-free rate is 2.5%.With no arbitrage,what must be the price of a European put on RBC with an exercise price of $85?

• A)$4.83
• B)$3.15
• C)$1.47
• D)$4.71
• E)$2.59

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Definitions:

Active Listening

The practice of fully concentrating, understanding, responding, and remembering what is being said in a conversation.

Respond To Feelings

Responding to feelings entails recognizing, understanding, and appropriately addressing one's own emotions or those of others in a compassionate and constructive manner.

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The act of rewording or restating something written or spoken by someone else, to achieve better clarity or a different perspective.

Zero-profit Equilibrium

A situation where firms in a perfectly competitive market earn just enough revenue to cover their total costs.