The following quotes were observed for options on a given stock on November 1 of a given year. These are American calls except where indicated. Use the information to answer questions 7 through 20.
The stock price was 113.25. The risk-free rates were 7.30 percent (November) , 7.50 percent (December) and 7.62 percent (January) . The times to expiration were 0.0384 (November) , 0.1342 (December) , and 0.211 (January) . Assume no dividends unless indicated.
-What is the European lower bound of the December 105 call?
Definitions:
Financing Cash Flow
Cash flow that is related to the financing of a company's operations, including debt, equity, and dividends.
Common Stock
A form of financial security that denotes part ownership in a company and entails a stake in the company's earnings or deficits.
Separate Entity Assumption
An accounting principle that treats a company as an independent entity separate from its owners for reporting purposes.
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