Suppose ABCD's Stock Price Is Currently $50

question 67

Multiple Choice

Suppose ABCD's stock price is currently $50.In the next six months it will either fall to $40 or rise to $60.What is the current value of a six-month call option with an exercise price of $50? The six-month risk-free interest rate is 2% (periodic rate) .

• A)$5.39
• B)$15.00
• C)$8.25
• D)$8.09

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Definitions:

Equilibrium Wage

The wage rate at which the quantity of labor supplied and the quantity of labor demanded are equal.

Price of Output

The amount of money charged for a product or service produced by a business or an economy.

Labor

The application of human physical and intellectual labor in the creation of goods and services.

Capital Equipment

Long-term assets acquired or used by a business for the production of goods and services, such as machinery, buildings, and vehicles.