Consider a Stock Priced at $30 with a Standard Deviation

question 42

Multiple Choice

Consider a stock priced at $30 with a standard deviation of 0.3. The risk-free rate is 0.05. There are put and call options available at exercise prices of 30 and a time to expiration of six months. The calls are priced at $2.89 and the puts cost $2.15. There are no dividends on the stock and the options are European. Assume that all transactions consist of 100 shares or one contract (100 options) . Use this information to answer questions 1 through 10.
-Suppose the buyer of the call in problem 1 sold the call two months before expiration when the stock price was $33.How much profit would the buyer make?

• A)$32.89
• B)$30.11
• C)$78.00
• D)$11.00
• E)none of the above

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Definitions:

Outstanding Checks

Checks that are recorded in the financial records but haven't been cashed or processed by the bank yet.

Adjusting Entry

A journal entry made in accounting records at the end of an accounting period to allocate income and expenditures to the appropriate period.

Bank Reconciliation

The process of matching and comparing figures from accounting records against those presented on a bank statement to ensure they are consistent and accurate.

Outstanding Checks

Checks that have been written and recorded in a checking account's ledger but have not yet been cleared or deducted from the bank's balance.