Assume That the Current Stock Price Is $50 Per Share

question 103

Essay

Assume that the current stock price is $50 per share, that call options can be purchased with an exercise price of $60 per share, that bank loans can be obtained for a 10% nominal rate, and that at expiration of the option in three months, the stock will either be valued at $30 or $70.Show that it is possible to replicate the stock payoff by borrowing and buying a call option.

---

Definitions:

Cohesion

The degree to which members of a group or team are united in pursuing common goals and how well they work together.

Team Building

Activities or exercises designed to improve interpersonal relations and group dynamics, enhancing the performance and efficiency of a team.

Accelerate

To increase the speed or rate of something, often referring to the process of speeding up a task or activity.

Heterogeneous

Refers to a mix or composition of elements that are varied or different in nature, composition, or characteristics.