Suppose ABCD's Stock Price Is Currently $50

question 6

Multiple Choice

Suppose ABCD's stock price is currently $50. In the next six months it will either fall to $40 or rise to $60. What is the current value of a six-month call option with an exercise price of $50? The six-month risk-free interest rate is 2 percent (periodic rate) .

• A)$5.39
• B)$15.00
• C)$8.25
• D)$8.09

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Definitions:

Company's Records

Official documents and files that include a business's operational, financial, and transactional data.

Canceled Check

A check that has been paid or cleared by the bank it was drawn on and thus is marked as "canceled," making it no longer negotiable.

Journal

A record where all financial transactions are initially entered, which may later be posted to a ledger.

Company's Records

Company's records comprise all documents, books, papers, and financial statements that depict the business transactions and financial status of a company.