A one-year European call option on ABX corporation with a strike price of $50 is currently trading for $1.45,and a one-year European put option on ABX with the same strike price is currently trading for $6.22.If the stock pays a one-time dividend of $1.50 in exactly 6 months,and the risk-free rate is 8% per year,what is the current price of ABX stock?
A)$42.97
B)$43.03
C)$49.63
D)$52.53
E)$55.41

Question

Quizplus · Accepted Answer

The correct answer is A because the current price of ABX stock is $42.97. This can be calculated using the Black-Scholes model, which takes into account the stock price, strike price, time to expiration, risk-free rate, and dividend yield.

A One-Year European Call Option on ABX Corporation with a Strike