The Current Price of a Stock Is $22, and at the End

question 24

Multiple Choice

The current price of a stock is $22, and at the end of one year its price will be either $27 or $17.The annual risk-free rate is 6.0%, based on daily compounding.A 1-year call option on the stock, with an exercise price of $22, is available.Based on the binomial model, what is the option's value? (Hint: Use daily compounding.)

• A) $2.43
• B) $2.70
• C) $2.99
• D) $3.29
• E) $3.62

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Definitions:

Agreeableness

A personality trait characterized by kindness, empathy, and a desire to get along with others.

Good-Natured

Possessing a friendly and pleasant disposition.

Individualistic Culture

A society that values independence and self-reliance, emphasizing personal freedom and achievement rather than collective goals.

Japan

Japan is an island country in East Asia, known for its rich cultural heritage, advanced technology, and distinctive blend of traditional and modern lifestyles.