A Stock with a Current Price of $43 Will Either

question 56

Multiple Choice

A stock with a current price of $43 will either move up by a factor of 1.20 or down by a factor of .80 each period over the next two periods. The risk-free rate of interest is 3%. What is the current value of a call option with a strike price of $45?

• A)$4.38
• B)$4.55
• C)$4.72
• D)$5.16
• E)$5.27

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