Luther Industries Is Currently Trading for $27 Per Share

question 9

Multiple Choice

Luther Industries is currently trading for $27 per share.The stock pays no dividends.A one-year European put option on Luther with a strike price of $30 is currently trading for $2.60.If the risk-free interest rate is 6% per year,then the price of a one-year European call option on Luther with a strike price of $30 will be closest to:

• A)$1.30.
• B)$7.10.
• C)$2.60.
• D)$1.95.

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Definitions:

Eavestroughs

Gutters fixed beneath the edge of a roof for draining rainwater from a roof.

Shortcut

A more direct route or method than the usual one, often used to save time or effort.

Neighbour's Backyard

The outdoor area or garden located at the back of a neighbor's house, often referenced in discussions about privacy and property boundaries.

Walk Home

The act of going back to one's place of residence on foot.