A call option has a price of $0.50 with exercise price of $14.00 and underlying asset price of $15.00.If the time to maturity is 60 days and the risk-free return is 7% p.a. ,what is the pricing bound error?

A) $ 0 $
B) $ 0.50 $
C) $ 0.66 $
D) $ 1.16 $

Question

A call option has a price of $0.50 with exercise price of $14.00 and underlying asset price of $15.00.If the time to maturity is 60 days and the risk-free return is 7% p.a. ,what is the pricing bound error?

A) $ 0 $
B) $ 0.50 $
C) $ 0.66 $
D) $ 1.16 $

Quizplus · Accepted Answer

The lower pricing bounds for the European call option have been breached: 0.50 < 15 - 13.84.The error is therefore 1.16 - 0.50 = 0.66.

A Call Option Has a Price of $0 0 0 0

A Call Option Has a Price of $0 $0$