Asked by Jaylin Johnson on May 05, 2024
Verified
Top Flight Stock currently sells for $53. A one-year call option with strike price of $58 sells for $10, and the risk-free interest rate is 5.5%. What is the price of a one-year put with strike price of $58?
A) $10.00
B) $12.12
C) $16.00
D) $11.98
E) $14.13
Risk-Free Interest Rate
The theoretical rate of return on an investment with zero risk, typically represented by government bonds.
Call Option
An option contract that gives the holder the right, but not the obligation, to buy a specified quantity of an underlying asset at a set price within a specific period.
Strike Price
The predetermined price at which an option's contract can be exercised, allowing for the purchase or sale of the underlying asset.
- Comprehend the basic concepts of option pricing and valuation.
Verified Answer
Learning Objectives
- Comprehend the basic concepts of option pricing and valuation.
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