Consider Five Put Options at Strikes 40, 45, 50, 55

question 4

Multiple Choice

Consider five put options at strikes 40, 45, 50, 55, and 60. The price of the 40-strike option is $4, the price of the 50-strike put is $5, and the price of the 60-strike option is $8. Which of the following statements is most accurate? (Assume all options have the same maturity.)

• A) The maximum difference between the prices of the 55-strike put and the 45-strike put is $0.
• B) The difference between the maximum prices of the 55-strike put and the 45-strike put is $0.50.
• C) The minimum difference between the prices of the 55-strike put and the 45-strike put is $1.00.
• D) The difference between the maximum prices of the 55-strike put and the 45-strike put is $2.00.

---

Definitions:

Three-Fifths Compromise

A constitutional agreement reached during the 1787 United States Constitutional Convention, allowing three-fifths of the slave population to be counted for determining direct taxation and representation in the House of Representatives.

Southern Planters

Southern Planters were wealthy farmers in the southern United States who owned large estates and relied extensively on enslaved labor for agricultural production before the Civil War.

New Jersey Plan

A proposal at the Constitutional Convention of 1787 advocating for equal representation of each state in Congress, regardless of the state's population size.

Less Populous

Refers to areas, regions, or groups having a smaller population in comparison to others.