Suppose Caroll's Stock Price Is Currently $20

question 64

Multiple Choice

Suppose Caroll's stock price is currently $20. In the each next six month periods it will either fall by 50% or rise by 100%. What is the current value of a one-year call option with an exercise price of $15? The six-month risk-free interest rate (periodic rate) is 5%. [Use the two stage binomial method]

• A) $8.73
• B) $10.03
• C) $16.88
• D) $13.33

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Definitions:

Cell Membrane

The semipermeable membrane surrounding the cytoplasm of a cell, regulating the entry and exit of substances.

Cytoplasm

Cytoplasm refers to the jelly-like substance within a cell, excluding the nucleus, that contains organelles and is the site of many metabolic processes.

Lysosomes

Membrane-bound organelles in the cytoplasm of eukaryotic cells containing enzymes that break down biomolecules.

Cellular Digestion

The process by which cells break down complex molecules into simpler ones to obtain energy and remove waste materials.