USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 90

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The current stock price of Zanco Corporation is $50. Zanco Corporation has the following put and call option prices with exercise prices at $45 and $50.

-Refer to Exhibit 14.5. The time premium for the put option with a $45 exercise price is

• A) $0.00.
• B) $1.50.
• C) $2.75.
• D) $5.25.
• E) $6.50.

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Definitions:

Perpetuities

Financial instruments or investments that provide a never-ending stream of cash flows with no expiration date.

Market Price

The current price at which an asset or service can be bought or sold.

Risky

Characterized by or involving uncertainty, potential danger, or financial loss.

Interest Rates

The cost of borrowing money or the return on investment, expressed as a percentage, that lenders charge borrowers over a specified period.