A Firm Has Stock Outstanding with a Current Price of $35

question 27

Multiple Choice

A firm has stock outstanding with a current price of $35 per share. The price in one period is expected to be either $40 or $48. A call option on ONE share is available with an exercise price of $30. If the risk-free rate of interest is 6%, what would you pay for the call option?

• A) $6.29
• B) $6.50
• C) $6.70
• D) $7.09
• E) $7.27

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Definitions:

Product Modification

A strategy where a company makes minor changes or improvements to a product to increase its appeal or to reach a different market segment.

Category Development Index

Category Development Index (CDI) measures the sales performance of a category within a specific market relative to the average market performance.

Brand Development Index

A measure of the sales strength of a brand within a specific market or demographic group.

Product Manager

A professional role responsible for the development, marketing, and overall management of a product or product line throughout its lifecycle.