The Following Quotes Were Observed for Options on a Given

question 31

Multiple Choice

The following quotes were observed for options on a given stock on November 1 of a given year. These are American calls except where indicated. Use the information to answer questions 7 through 20.

The stock price was 113.25. The risk-free rates were 7.30 percent (November) , 7.50 percent (December) and 7.62 percent (January) . The times to expiration were 0.0384 (November) , 0.1342 (December) , and 0.211 (January) . Assume no dividends unless indicated.
-From American put-call parity,what are the minimum and maximum values that the sum of the stock price and December 110 put price can be?

• A)101.81 and 102.87
• B)2.50 and 113.25
• C)116.038 and 117.10
• D)7.125 and 110
• E)none of the above

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Definitions:

Opportunity Cost

The loss incurred by rejecting the immediate best alternative when arriving at a decision.

Fix A Meal

The process of preparing and cooking a meal.

Better Off

A term indicating an improvement in condition or well-being, often referring to economic improvement or increased welfare.

Constant Rate

A fixed rate at which something occurs or is applied over a particular period of time.