Consider a Stock Priced at $30 with a Standard Deviation

question 19

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.
-What is the minimum profit from the transaction described in Question 6 if the position is held to expiration?

• A)-$2,711
• B)-$3,289
• C)-$3,000
• D)negative infinity
• E)none of the above

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Definitions:

Protists

Refers to a diverse group of eukaryotic organisms, mostly unicellular, that are not animals, plants, or fungi.

Classified

The process of organizing or categorizing items or information based on shared qualities or characteristics.

Aquatic Predators

Organisms that live in water environments and obtain their energy and nutrients by hunting and consuming other aquatic organisms.

Radiolaria

Heterotrophic single-celled protists with a porous shell of silica and cytoplasmic extensions.