Consider a Stock Priced at $30 with a Standard Deviation

question 25

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.
-What is the maximum profit from the transaction described in Question 6 if the position is held to expiration?

• A)$3,289
• B)$289
• C)infinity
• D)$2,711
• E)none of the above

---

Definitions:

Sales Journal

The Sales Journal is a specialized accounting journal used to record all sales of merchandise on credit.

General Journal

The primary journal where all types of transactions are first recorded in chronological order before posting to accounts.

Cash Sales Return

Refunds issued to customers for goods returned that were originally purchased with cash, impacting both the company's inventory and its cash balances.

Cash Payments Journal

A financial journal that records all disbursements of cash, including expenses, asset purchases, and debt payments.