The Price of a European Call Option on Lululemon Stock

question 53

Multiple Choice

The price of a European call option on Lululemon stock with an exercise price of $34.50 and one year to expiry is trading at $2.52.The current price of the stock is $34,and the risk-free rate is 4%.With no arbitrage,what must be the price of a European put on Lululemon with an exercise price of $34.50?

• A)$3.37
• B)$0.71
• C)$1.69
• D)$2.52
• E)$0.50

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Definitions:

Security Interest

A legal claim or right granted over assets as security for the repayment of a debt or performance of some obligation.

Personal Property

Any form of property that is movable and not fixed permanently to one location, as opposed to real property or real estate.

Debtor's Possession

Refers to a situation in bankruptcy proceedings where the debtor retains possession and control of its assets while undergoing reorganization.

Security Interest

A legal claim or lien on collateral that has been offered to secure a loan, which grants the lender a right to repossession if the borrower defaults.