Consider a Stock Priced at $30 with a Standard Deviation

question 50

Multiple Choice

Consider a stock priced at $30 with a standard deviation of 0.3. The risk-free rate is 0.05. There are put and call options available at exercise prices of 30 and a time to expiration of six months. The calls are priced at $2.89 and the puts cost $2.15. There are no dividends on the stock and the options are European. Assume that all transactions consist of 100 shares or one contract (100 options) . Use this information to answer questions 1 through 10.
-If the transaction described in problem 6 is closed out when the option has three months to go and the stock price is at $36,what is the investor's profit?

• A)$600
• B)$311
• C)$889
• D)$229
• E)none of the above

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Definitions:

Complex Business Issues

Intricate or complicated challenges that organizations face, requiring strategic thinking and decision-making.

Limiting the Scope

The process of defining clear boundaries for a project or investigation to focus on specific objectives and manage resources effectively.

Defining

The act of explaining the meaning of a word, phrase, or concept, often to clarify its understanding.

Choosing Your Approach

Involves selecting the most effective strategy to achieve a specific goal or solve a particular problem, considering various factors like the audience, objectives, and context.