Suppose Carol's Stock Price Is Currently $20

question 18

Multiple Choice

Suppose Carol's stock price is currently $20. In each six-month period it will either fall by 50 percent or rise by 100 percent. What is the current value of a one-year call option with an exercise price of $15? The six-month risk-free interest rate is 5 percent per six-month period. [Use the two-stage binomial method.]

• A)$8.73
• B)$10.03
• C)$16.88
• D)$13.33

---

Definitions:

Funduscopy

A medical examination of the interior of the eye, including the retina, optic disc, and blood vessels, using a special instrument called an ophthalmoscope.

Urinalysis

Urinalysis is a test conducted on urine samples to detect disorders or diseases such as urinary tract infections, kidney disease, and diabetes.

Otoscope

A medical device used to look into the ears, allowing for the examination of the outer and middle ear.

Romberg Balance Test

A clinical test of the body's sense of positioning (proprioception), where the patient is asked to stand with their feet together and eyes closed.