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

question 85

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 down in value once (C_d) .

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

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Definitions:

Enlightenment Philosophy

A movement in the 17th and 18th centuries emphasizing reason and individualism rather than tradition; it heavily influenced the development of Western political, philosophical, and scientific thought.

Sociological Thought

The range of theories and ideas in the field of sociology that aim to understand and analyze society and human behavior.

Unique Social Contexts

Specific settings or environments where social interactions and behaviors are shaped by distinct cultural, economic, and historical factors.

Counterrevolutionary Philosophy

An ideology or thought process that argues against or seeks to reverse changes brought about by a revolution.