Luther Industries Is Currently Trading for $27 Per Share

question 30

Multiple Choice

Luther Industries is currently trading for $27 per share. The share pays no dividends. A one-year European put option on Luther with an exercise price of $30 is currently trading for $2.60. If the risk-free interest rate is 6% per year, then the price of a one-year European call option on Luther with an exercise price of $30 will be closest to:

• A)$1.30
• B)$1.95
• C)$2.60
• D)$7.10

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Definitions:

Reciprocal Determinism

The notion that external determinants of behavior, internal determinants of behavior, and behavior all influence one another.

Reinforcement Value

The degree to which an outcome or reward is considered desirable or valuable, influencing the likelihood of a behavior's repetition.

Social-cognitive Theory

A theoretical framework that emphasizes the importance of observational learning, imitation, and modeling in understanding human behavior.

Radical Behaviorism

Radical behaviorism is a theory in psychology that emphasizes the external behaviors of individuals as the most important factors in understanding human behavior, downplaying the role of internal thoughts and feelings.