Exhibit 20.7
Use the Information Below for the Following Problem(S)
The current stock price of Zanco Corporation is $50. Zanco Corporation has the following put and call option prices with exercise prices at $45 and $50.
$$\begin{array} { c c c }
\text { Exprcisp Price } & \text { Put Price } & \text { Call Price } \
\$ 45 & \$ 1.50 & \$ 6.75 \
\$ 50 & \$ 3.75 & \$ 4.25
\end{array}$$
-Refer to Exhibit 20.7.The time premium for the put option with a $45 exercise price is
A) $0.00
B) $1.50
C) $2.75
D) $5.25
E) $6.50

Question

Exhibit 20.7
Use the Information Below for the Following Problem(S)
The current stock price of Zanco Corporation is $50. Zanco Corporation has the following put and call option prices with exercise prices at $45 and $50.
 $$\begin{array} { c c c } 
\text { Exprcisp Price } & \text { Put Price } & \text { Call Price } \
\$ 45 & \$ 1.50 & \$ 6.75 \
\$ 50 & \$ 3.75 & \$ 4.25
\end{array}$$
-Refer to Exhibit 20.7.The time premium for the put option with a $45 exercise price is
A) $0.00
B) $1.50
C) $2.75
D) $5.25
E) $6.50

Quizplus · Accepted Answer

The time premium for the put option with a $45 exercise price is $1.50.
The put option is out of the money so the market price is purely a time premium.

Exhibit 20 -Refer to Exhibit 20