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

question 66

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 today (C₀) .

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

---

Definitions:

Activity Levels

The degree to which an individual engages in physical movement that can range from sedentary to highly active behavior.

Rough-and-Tumble Play

Rough-and-tumble play is a form of play that appears rough, involving chase and play-fighting, but is actually cooperative and helps in children's social development.

Activity Levels

The degree of physical movement or energy expenditure, which can vary significantly among individuals and is considered a trait of temperament.

Motor Vehicle Accidents

Incidents involving road vehicles that result in property damage, injury, or death.