Using a Binomial Tree,what Is the Price of a $40

question 13

Multiple Choice

Using a binomial tree,what is the price of a $40 strike 6-month call option,using 3-month intervals as the time period? Assume the following data: S = $37.90,r = 5.0%,σ = 0.35

• A) $2.50
• B) $2.76
• C) $2.92
• D) $3.08

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Definitions:

Operating Activities

Activities related to the daily operations of a business, such as selling products, managing costs, and paying employees, as reflected in the company’s cash flow.

Source Of Cash

Any activity or operation that brings money into the organization, increasing its cash availability.

Current Assets

Resources intended to be turned into cash, sold, or used up either within one year or over the course of the business's operating cycle, depending on which period is greater.

Cash Reserves

Funds that a company or individual keeps on hand to meet short-term and emergency funding needs.