A Call Option Has an Exercise Price of $30

question 9

Multiple Choice

A call option has an exercise price of $30.The stock price at a point on the binomial tree is $36.24.The calculated present value of the option at that same point is $5.86.What figure should be used to calculate option prices at points moving toward the final price?

• A) $5.86
• B) $6.24
• C) $6.62
• D) $7.01

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Definitions:

Separating Equilibrium

A situation in game theory or economic models where differing types, strategies, or qualities of players or products lead to distinct outcomes, separating them into different equilibrium points.

Pooling Equilibrium

A situation in a market with incomplete information where different types of economic agents are treated indistinguishably due to a lack of distinguishing information.

Agents

Individuals or entities that act on behalf of others in economic transactions or negotiations, making decisions and taking actions.

Total Value

The complete worth or sum of all financial, labor, or material resources in a given context.