Exhibit 22.6 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 63

Multiple Choice

Exhibit 22.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The following information is provided in the context of a two period (two six month periods) binomial option pricing model. A stock currently trades at $60 per share, a call option on the stock has an exercise price of $65. The stock is equally likely to rise by 15% or fall by 15% during each six month period. The one-year risk free rate is 3%.
-Refer to Exhibit 22.6. Calculate the price of the call option after the stock price has already moved up in value once (C_u) .

• A)$7.77
• B)$14.35
• C)$0
• D)$4.21
• E)$6.44

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Definitions:

Utility Costs

Expenses incurred for basic services provided to a facility, including electricity, gas, water, and sewer services.

Purchasing Power

The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy.

Aircraft Scheduling

The process of planning and assigning available aircraft to flights, considering factors such as maintenance, crew availability, and operational efficiency.

Shipments Pattern

The distribution or arrangement of how goods are transported from one location to another over a specific period.