An investor purchases a nondividend-paying stock and writes a t-year, European call option for this stock, with call premium C. The stock price at time of purchase and strike price are both K.

Assume that there are no transaction costs.

The risk-free annual force of interest is a constant r. Let S represent the stock price at time t. S > K.

Determine an algebraic expression for the investor's profit at expiration.

(A) Ce^rt

(B) C(1 + rt) – S + K 

(C) Ce^rt – S + K 

(D) Ce^rt + K(1 – e^rt)

(E) C(1 + r)^t + K[1 – (1 + r)^t]