The Following Quotes Were Observed for Options on a Given

question 51

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.
-What is the intrinsic value of the December 115 put?

• A)1.75
• B)0.00
• C)3.90
• D)3.00
• E)none of the above

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Definitions:

Payoff Table

A tabular representation of the outcomes for each combination of strategies in decision theory, typically used in strategic decision making and game theory.

States of Nature

Hypothetical conditions that could affect the outcome of a decision or experiment but are beyond the control of the decision-maker.

Decision Alternatives

Possible actions or choices available to decision-makers in a decision-making process.

Opportunity Loss

The loss of potential gain from other alternatives when one alternative is chosen.