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Refer to the table below and answer the following question. Option Market Price Strike Price Standard Deviation of Stock Price A. European 3-month put $90
Refer to the table below and answer the following question.
Option | Market Price | Strike Price | Standard Deviation of Stock Price |
A. European 3-month put | $90 | $100 | 15% |
B. European 3-month put | $110 | $100 | 15% |
C. European 1-month put | $90 | $100 | 15% |
Of the above options, which would you expect to have the highest option price?
A) | Option C should have the highest option price because Option C has the shortest time to maturity and the same standard deviation as Options A and B. |
B) | Option A should have the highest option price. It has an intrinsic value of $10, the same standard deviation as Options B and C, and a longer time to expiration than Option C. |
C) | Option B should have the highest option price. It has an intrinsic value of $10, the same standard deviation as Options A and C, and a longer time to expiration than Option C. |
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