A Stock Is Currently Trading at a Price of 22 $C ( 20 ) = 3.25$

question 21

Multiple Choice

A stock is currently trading at a price of 22. You observe the following prices for European call options on the stock (the strikes are in parentheses) : $C ( 20 ) = 3.25$ , $C ( 22 ) = 1.95$ , and $C ( 24 ) = 0.40$ . You can conclude from this that

• A) The 20-strike call is overvalued.
• B) The 24-strike call is undervalued.
• C) The prices of the calls are inconsistent with no-arbitrage.
• D) The stock is mispriced.

---

Definitions:

Ambidextrous Organization

An organization capable of exploiting existing competencies while simultaneously exploring new opportunities.

Exploiting

Taking advantage of a situation or person, typically in an unfair or unethical manner, for one's own benefit.

Modular Organization

A flexible organizational structure that consists of separate business units or modules, each focusing on a different product or service area.

Decentralized

A system where operations or decisions are distributed among various locations or authorities rather than being concentrated in a single one.