The Following Prices Are Available for Call and Put Options

question 25

Multiple Choice

The following prices are available for call and put options on a stock priced at $50.The risk-free rate is 6 percent and the volatility is 0.35.The March options have 90 days remaining and the June options have 180 days remaining.The Black-Scholes model was used to obtain the prices.
Use this information to answer questions 1 through 20.Assume that each transaction consists of one contract (for 100 shares) unless otherwise indicated.
Answer questions 12 through 17 about a long straddle constructed using the June 50 options.
-What will the straddle cost?

• A)$145
• B)$690
• C)$971
• D)$413
• E)none of the above

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Definitions:

Tax Rate Structure

The way in which tax rates progress based on variables such as income level, with different rates applied to different levels or brackets of income.

Marginal Tax Rate

The rate at which the last dollar of a taxpayer's income is taxed, indicating the percentage of tax applied to their highest bracket of income.

Average Tax Rate

The proportion of total income paid in taxes, calculated by dividing the total tax amount by the taxable income.

Marginal Tax Rate

The rate at which the last dollar of income is taxed, representing the increment in tax paid for an increment in income.