Exhibit 22.6 Use the Information Below for the Following Problem(S)

question 80

Multiple Choice

Exhibit 22.6
Use the Information Below for the Following Problem(S)
The following information is provided in the context of a two period (two six month periods) binomial option pricing model. A stock currently trades at $60 per share, a call option on the stock has an exercise price of $65. The stock is equally likely to rise by 15% or fall by 15% during each six month period. The one-year risk free rate is 3%.
-Refer to Exhibit 22.6.Calculate the price of the call option after the stock price has already moved down in value once (Cd) .

• A) $7.77
• B) $14.35
• C) $0
• D) $4.21
• E) $6.44

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Definitions:

Bargaining Zone

The range or area in negotiations in which parties are willing to compromise or make concessions in order to reach an agreement.

Resistance Point

The threshold beyond which a person or entity is unwilling to go during negotiations; it represents the limit of concessions they are willing to make.

Dialogue

A form of communication where two or more parties engage in open, reciprocal conversation aimed at mutual understanding or problem-solving.

Conflict Reduction

Refers to the process of minimizing disagreements and disputes within a group or organization to facilitate smoother operations and interactions.