In each of the following questions, you are asked to compare two options with pa

Question

In each of the following questions, you are asked to compare two options with parameters as given. The risk-free interest rate for all cases should be assumed to be 6%. Assume the stocks on which these options are written pay no dividends.

a. Which put option is written on the stock with the lower price?

i. A.

ii. B.

iii. Not enough information.

b. Which put option must be written on the stock with the lower price?

i. A.

ii. B.

iii. Not enough information.

c. Which call option must have the lower time to expiration?

i. A.

ii. B.

iii. Not enough information.

d. Which call option is written on the stock with higher volatility?

i. A.

ii. B.

iii. Not enough information.

e. Which call option is written on the stock with higher volatility?

i. A.

ii. B.

iii. Not enough information.

Explanation / Answer

1b

2b

3c

4a

5a

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