The Current Price of a Stock Is $22, and at the End

question 1

Multiple Choice

The current price of a stock is $22, and at the end of one year its price will be either $27 or $17. The annual risk-free rate is 6.0%, based on daily compounding. A 1-year call option on the stock, with an exercise price of $22, is available. Based on the binominal model, what is the option's value?

• A) $2.43
• B) $2.70
• C) $2.99
• D) $3.29
• E) $3.62

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Definitions:

World War II

A global conflict that occurred from 1939 to 1945, involving most of the world's nations and marked by significant events and atrocities, including the Holocaust.

Higher Needs

In Maslow's hierarchy, these are psychological needs relating to self-fulfillment, such as self-actualization and esteem needs, considered more complex than basic physiological or safety needs.

Actual Survival

The real, physical continuation of life or existence, especially under adverse conditions.

Hierarchy of Needs

A psychological theory proposed by Abraham Maslow that prioritizes human needs from the most basic physical needs to higher-level psychological needs and self-fulfillment.