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The Price of a Call Option on Microsoft Stock with a Maturity

question 109

Multiple Choice

The price of a call option on Microsoft stock with a maturity of six months and a strike price of $40 is $3.50,and the price of the stock is $38.50.The price of a put option on the same stock with the same strike price and time to maturity is $1.25.Calculate the risk-free rate.


Definitions:

Earnings and Profits

A measure of a company's ability to generate income over its expenses, often used in corporate taxation.

Capital Gain

The profit from the sale of a capital asset, such as stocks, bonds, or real estate, exceeding the purchase price.

Stockholder

An individual or entity that owns shares of stock in a corporation, giving them a claim on part of the corporation's assets and earnings.

Maximum Marginal

typically refers to the highest tax rate applied to the last dollar of taxable income in progressive tax systems.

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