Consider Two Six-Month American Calls at Strikes 90 and 100

question 4

Multiple Choice

Consider two six-month American calls at strikes 90 and 100 on a non-dividend paying stock. The risk free rate is 2%. The difference between the two call prices at any time before maturity will always be

• A) Less than $10.
• B) Equal to $10.
• C) Greater than $10.
• D) One cannot be sure of which of the preceding three choices is valid and more information may be required.

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Definitions:

Equipment Malfunction

A situation where machinery or technical equipment fails to operate correctly or breaks down during use.

Concerned Authorities

Refers to the relevant officials or organizations that have control or jurisdiction over a particular area or issue.

Task Demand

The specific requirements and responsibilities associated with a job, including the skills, effort, and responsibilities required to effectively perform the work.

Group Pressure

The influence exerted by a group on individuals to conform to certain behaviors, attitudes, or standards.