Assume That the Stock of Phoneeffect, Inc

question 53

Multiple Choice

Assume that the stock of Phoneeffect, Inc., is currently trading for $16 and will either rise to $23.50 or fall to $9 in one year. The risk-free rate for one year is 3 percent. What is the value of a put option with a strike price of $18 that expires in three months? (Do not round intermediate computations. Round final answer to two decimal places.)

• A) $0
• B) $2.75
• C) $4.23
• D) $5.73

---

Definitions:

Solar Keratosis

A rough, scaly patch on the skin caused by years of sun exposure, often considered a precancerous growth.

Ritalin

A stimulant medication commonly used to treat attention deficit hyperactivity disorder (ADHD) and certain sleep disorders.

Adverse Effect

An unexpected, bad result; also known as an adverse reaction. The harm a patient experiences by a medication that has been prescribed by a health care professional and taken as instructed; an unexpected reaction to a drug taken for therapeutic purposes.

Administration Route

The path by which a drug, fluid, poison, or other substance is taken into the body, such as orally, intravenously, or topically.