SCU stock is currently priced at $106 per share, and the risk-free interest rate is 3.25%. Assuming that SCU does not pay any dividends, what is the lower bound of an American put option on SCU that expires in three months and has an exercise price of $l10?
A. $0
B. $0.48
C. $3.11
D. $4.00
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With respect to option strategies, the shape of the graph that illustrates both the value at expiration and profit for selling a put is most in shape to the graph for:
A. selling a call.
B. buying a call.
C. a covered call position.
D. a protective put position.
Based on put–call parity for European options, a synthetic put is most likely equivalent to a:
A. short call, long underlying asset, short bond.
B. long call, short underlying asset, long bond.
C. long call, long underlying asset, short bond.
An investor purchases ABC stock at $71 per share and executes a protective put strategy. The put option used in the strategy has a strike price of $66, expires in two months, and is purchased for $1.45. At expiration, the protective put strategy breaks even when the price of ABC is closest to:
A. $64.55.
B. $67.45.
C. $72.45.
According to put-call parity, if a fiduciary call expires in the money, the payoff is most likely equal to the:
A. face value of the risk-free bond.
B. difference between the market value of the asset and the face value of the risk-free bond.
C. market value of the asset.