Which of the following options on corn is most valuable? Assume the variance of
ID: 2714512 • Letter: W
Question
Which of the following options on corn is most valuable? Assume the variance of return and the risk free rate are the same in all cases.
The call option with a strike price of $3 is worth less than the put option with a strike price of $3.
A call option with a strike price of $4 and 60 days to expiration when corn is trading at $4.00 per bushel.
A call option with a strike price of $4 and 30 days to expiration when corn is trading at $3.00 per bushel.
A call option with a strike price of $4 and 60 days to expiration when corn is trading at $3.00 per bushel.
A.The call option with a strike price of $3 is worth less than the put option with a strike price of $3.
B.A call option with a strike price of $4 and 60 days to expiration when corn is trading at $4.00 per bushel.
C.A call option with a strike price of $4 and 30 days to expiration when corn is trading at $3.00 per bushel.
D.A call option with a strike price of $4 and 60 days to expiration when corn is trading at $3.00 per bushel.
Explanation / Answer
Answer:
Option-B is most valuable as in this option only we have the strike price equal to the trading price and we can make some profit after the expiry of the option.
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