Assume the Following Data on a 6-Month Call Option, Using

question 20

Multiple Choice

Assume the following data on a 6-month call option, using 3-month intervals as the time period. K = $50, S = $48, r = 4.0%, = .27. What is the risk neutral probability of an up move in the stock price?

• A) 45.24 %
• B) 47.25 %
• C) 52.75 %
• D) 54.76 %

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Definitions:

ECNs

Electronic communication networks that facilitate the buying and selling of securities outside traditional stock exchanges.

Transactions Costs

Expenses incurred when buying or selling securities, including broker commissions and spreads.

Traditional Markets

Markets that refer to established financial exchange venues and systems where stocks, bonds, and other securities are traded.

Initial Margin

This refers to the minimum amount of capital required to enter into a position in the securities or futures market, serving as a deposit to cover potential losses.