A One-Year European Call Option on ABX Corporation with a Strike

question 35

Multiple Choice

A one-year European call option on ABX corporation with a strike price of $50 is currently trading for $4.30,and a one-year European put option on ABX with the same strike price is currently trading for $1.47.If the stock pays no dividends and the risk free rate is 4% per year,what is the current price of ABX stock?

• A)$39.79
• B)$41.57
• C)$45.25
• D)$50.91
• E)$53.85

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Definitions:

Variable Costing

An accounting method that only allocates variable costs to product costs, excluding fixed factory overhead.

Direct Costing

A pricing strategy that only accounts for direct costs in the production of goods, excluding fixed overhead expenses.

Indirect Costing

A method of accounting that allocates indirect costs to products or services, often used in costing overheads.

EBITDA

Term for earnings before interest, taxes, depreciation, and amortization; operating income expressed by adding back depreciation and amortization expense.