The Following Quotes Were Observed for Options on a Given

question 54

Multiple Choice

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 November 115 call?

• A)1.44
• B)0.00
• C)1.75
• D)2.06
• E)none of the above

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