The Following Prices Are Available for Call and Put Options

question 24

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.
-Suppose a put is added to a straddle.This overall transaction is called a strip.Determine the profit at expiration on a strip if the stock price at expiration is $36.

• A)-$129
• B)$1,416
• C)$429
• D)$1,384
• E)none of the above

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A method used to identify the underlying causes of a problem or event by examining the relationship between actions and outcomes.

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