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 4%. Assume the stocks on which these options are written pay no dividends.

a. Put T X σ Price of Put A 0.5 50 0.20 $10 B 0.5 50 0.25 $10 Which put option is written on the stock with the lower price?
i. A.
ii. B.
iii. Not enough information.

b. Put T X σ Price of Put A 0.5 50 0.2 $10 B 0.5 50 0.2 $12 Which put option must be written on the stock with the lower price?
i. A.
ii. B.
iii. Not enough information.

c. Call S X σ Price of Call A 50 50 0.20 $12 B 55 50 0.20 $10 Which call option must have the lower time to expiration?
i. A.
ii. B.
iii. Not enough information.

d. Call T X S Price of Call A 0.5 50 55 $10 B 0.5 50 55 $12 Which call option is written on the stock with higher volatility?
i. A.
ii. B.
iii. Not enough information.

e. Call T X S Price of Call A 0.5 50 55 $10 B 0.5 50 50 $ 7 Which call option is written on the stock with higher volatility?
i. A.
ii. B.
iii. Not enough information. p-69