A Stock Is Currently Trading at a Price of 22 $C ( 20 ) = 3.35$

question 11

Multiple Choice

A stock is currently trading at a price of 22. You observe the following prices for European put options on the stock (the strikes are in parentheses) : $C ( 20 ) = 3.35$ and $C ( 22 ) = 1.95$ . Given this information, you can conclude that the minimum price of the 24-strike call consistent with no-arbitrage is

• A) 0.00.
• B) 0.55.
• C) 1.40.
• D) 2.00.

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Definitions:

Effective Yield

The total yield of a bond once all charges are factored in, expressed as an annual percentage.

Present Value Factors

Numeric factors used to calculate the present value of a future amount, taking into account a specific interest rate and time period.

Bond Discount

The variance between the face value of a bond and the price at which it's sold, occurring when the bond sells below its face value.

Carrying Value

The amount an asset is valued at in a company's books after accounting for depreciation and amortization.