Suppose You Are Looking to Exploit Opportunities in the Options

question 89

Multiple Choice

Suppose you are looking to exploit opportunities in the options markets. The price of a call option on Massive Industries with a maturity of one year and an exercise price of $150 is $15, and the share price is $140. What should the price of a put option be to preclude profitable opportunities? The risk-free rate of interest is 5%.

• A)$17.86
• B)$21.45
• C)$25.00
• D)$19.63

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Definitions:

Disagreement Value

The worst outcome that a party is willing to accept before walking away from negotiations or a transaction.

Car Dealer

A business entity that sells new or used cars at the retail level, based on a dealership contract with an automaker or its sales subsidiary.

Sale Price

The final price at which a product or service is sold after any deductions or promotions.

Bargaining Position

The relative power or advantage one party holds during negotiations, affecting their capacity to influence the terms.