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Question 22 Not yet answered A stock currently trades at $100. It is expected that dividends of $2.00/share will be paid to owners of the stock at 1 month and at 4 months from the current date. Consider these dates as ex-dividend dates as well. The continuously compounded risk free rate is 5%. European call and put options on the stock with exercise prices of $96 and 6 months to the expiration date are currently trading. Use this information to answer this and the next three questions. The lower bound for the value of the European call is closest to Marked out of 1.00 p Flag question O a $6.3702 O b. $4.3910 Oc $2.4116 Question 23 If the European call option has a market price (premium) of $2.00, the correct arbitrage strategy would involve: Not yet answered Marked out of O a. Buy the call, buy the stock, invest in the risk free asset Ob. Buy the call, short-sell the stock, invest in the risk free asset Oc Buy the call, short-sell the stock, short-sell the risk free asset 1.00 Flag question Question 24 Not yet Suppose that the European call option has a market price (premium) of $4.00. Based on put-call parity, the price of a European put on the stock with the same exercise price and time to expiration should be closest to: answered Marked out of 1.00 O a $1.5884 Ob $1.2942 OC. $1.7942 p Flag question Question 25 The lower bound for the value of an American call option on the stock with an exercise price of $96 and a time to expiration of 6 months should be closest to: Not yet answered O a $4.3984 Marked out of Ob $3.5971 1.00 Oc. $2.4116

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