Suppose You Are Looking to Exploit Opportunities in the Options

question 32

Multiple Choice

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

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

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Definitions:

Stock Dividends Distributable

A portion of retained earnings that has been declared as a dividend to be paid in the form of additional shares of the company's stock rather than cash.

Current Liability

Financial obligations that a company is expected to settle within one year or within its operating cycle, whichever is longer.

Public Corporation

A company whose shares are traded freely on a stock exchange, owned by public investors, and subject to specific disclosure and regulatory requirements.

Transfer Agents

Organizations or individuals responsible for maintaining records of securities owners and managing the transfer of stock or bonds between parties.