Option Valuation: Consider a Call Option with a Strike Price

question 3

Multiple Choice

Option valuation: Consider a call option with a strike price of $20, which expires in one year. The risk-free rate of interest is 5 percent. The underlying stock price is $30. Without arbitrage, which of the following is a possible price for the call option?

• A) $0
• B) $8
• C) $15
• D) None of the above

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