The Following Information Is Given About Options on the Stock $\sigma$

question 8

Multiple Choice

The following information is given about options on the stock of a certain company.
S₀ = 23 X = 20
r_c = 0.09 T = 0.5
$\sigma$ ² = 0.15
No dividends are expected.
Use this information to answer questions 1 through 8.
-Suppose you feel that the call is overpriced.What strategy should you use to exploit the apparent mis-valuation? (Due to differences in rounding your calculations may be slightly different."none of the above" should be selected only if your answer is different by more than 10 shares. )

• A)buy 791 shares,sell 1,000 calls
• B)buy 705 shares,sell 1,000 calls
• C)sell short 791 shares,buy 1,000 calls
• D)sell short 705 shares,buy 1,000 calls
• E)none of the above

---

Definitions:

Recognizing Process

The cognitive process involved in identifying and understanding stimuli, concepts, or objects.

Culture of Safety

A work environment where core values and behaviors result from a collective commitment by management and workers to emphasize safety over competing goals.

Systemic Issues

Problems or challenges that are deeply embedded within the structure and operation of a system, affecting its overall function.

Quality Model

A conceptual framework designed to improve and evaluate the efficiency, effectiveness, and quality of services or products within an industry.