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:

Dividends Payable

A liability account on a company's balance sheet representing the amount of declared dividends that have not yet been paid out to shareholders.

Beginning

The starting point or initial stage of an event, process, or time period.

Operating Activities

Transactions and events related to the primary business activities, such as cash received from sales of goods or services and cash paid for inventory, that affect the cash flow of a company.

Short-Term Notes

Debt securities with a maturity of less than one year, used by companies to manage short-term liquidity needs.