The Price of a European Put Option on Scotiabank Stock

question 10

Multiple Choice

The price of a European put option on Scotiabank stock with one year to expiry is trading at $1.05,and the price of a European call option is trading at $3.15.If the stock is currently trading at $43.25,and the risk-free rate is 3%,what is the exercise price of the options?

• A)$41.15
• B)$42.38
• C)$43.25
• D)$46.71
• E)$39.95

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Definitions:

Instinctual Drives

Fundamental, innate impulses that compel individuals to act or behave in certain ways, such as hunger or reproduction.

Ego

In Sigmund Freud’s theory, the structure that begins to develop in response to the fact that instinctual demands of the id are not always immediately met. The ego develops to curb the desires of id so that the individual does not suffer any unpleasant consequences.

Reality Principle

A psychoanalytic concept involving the ability of the mind to assess the external world and act upon it accordingly, often in contrast to the pleasure principle.

Right and Wrong

Fundamental concepts relating to ethics and morality, guiding behavior as acceptable or unacceptable.