For the Same Problem in the Preceding Two Questions, Find

question 4

Multiple Choice

For the same problem in the preceding two questions, find the state price at the middle node after two periods, given that the 117.3008--strike call is priced at $4 and the 85.2509--strike put is priced at $4, both options of two-months maturity. Assume that the middle node after two periods has the same stock price as the initial stock price.

• A) 0.5016
• B) 0.5023
• C) 0.5044
• D) 0.5117

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Definitions:

Seller Of A Put

An investor who sells put options in the expectation that the underlying stock price will remain above the option's strike price.

Purchase Shares

The act of buying ownership units in a company, often done through a stock exchange, to potentially earn dividends or sell at a higher price in the future.

Selling A Call Option

The action of granting someone the right, but not the obligation, to buy a specific amount of the underlying asset at a set price within a specified time frame.

Obligation To Sell

A commitment or requirement to sell an asset or security, often arising from a contractual agreement.