Luther Industries Is Currently Trading for $27 Per Share

question 17

Multiple Choice

Luther Industries is currently trading for $27 per share.The stock pays a quarterly dividend of $0.50 per share,with the next dividend to be paid in exactly 3 months.A one-year European put option on Luther with a strike price of $30 is currently trading for $4.60.If the risk-free interest rate is 6% per year,then the price of a one-year European call option on Luther with a strike price of $30 will be closest to:

• A)$3.91
• B)$5.03
• C)$5.29
• D)$1.37
• E)$1.57

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