A Stock with a Current Price of $18 Will Either

question 16

Multiple Choice

A stock with a current price of $18 will either move up by a factor of 1.2 or down by a factor of .9 each period over the next two periods. The risk-free rate of interest is 4.5%. What is the current value of a call option with a strike price of $20?

• A)$1.02
• B)$1.08
• C)$1.17
• D)$1.21
• E)$1.27

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