Suppose ABCD's Stock Price Is Currently $50

question 63

Multiple Choice

Suppose ABCD's stock price is currently $50.In the next six months it will either fall to $40 or rise to $80.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)$2.40
• B)$15.00
• C)$8.25
• D)$8.09

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