You Are Evaluating a Call Option with an Exercise Price

question 278

Multiple Choice

You are evaluating a call option with an exercise price of $140. The underlying stock has possible prices of $135 or $160 when the option expires. If the risk-free rate is 6%, how many options do you
Need to buy along with the risk-free asset to replicate the stock?

• A) 0.80 calls
• B) 1.00 calls
• C) 1.25 calls
• D) 1.75 calls
• E) 2.25 calls

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Definitions:

Expected Count

The anticipated frequency or number of occurrences of an event in statistical hypothesis testing.

Economic Concerns

Issues related to the financial health and stability of an economy, including inflation, unemployment, and GDP growth.

Housing

The provision of shelter or accommodation, including the structures and related policies that determine how residential spaces are built, allocated, and governed.

Null Hypothesis

A statistical hypothesis that assumes no significant difference or effect exists in the case under investigation.