A stock has a spot price of $55. Its May options are about to expire. One of its puts is worth $5 and one of its calls is worth $10. The exercise price of the put must be ________ and the exercise price of the call must be ________.

Question

Quizplus · Accepted Answer

For the put to be worth $5, the exercise price must be $50 or lower (otherwise, why would anyone exercise the option and sell the stock for less than it's worth?). 
For the call to be worth $10, the exercise price must be $60 or higher (otherwise, why would anyone exercise the option and buy the stock for more than it's worth?). 
Therefore, the only option that satisfies both conditions is choice C, with a put exercise price of $60 and a call exercise price of $45.

A Stock Has a Spot Price of $55