Consider a One-Period Binomial Model of 12 Months

question 3

Multiple Choice

Consider a one-period binomial model of 12 months.Assume the stock price is $54.00,σ = 0.25,r = 0.04 and the exercise price of a call option is $55.What is the forecasted price of the stock given a downward movement during the year?

• A) $43.77
• B) $ 45.28
• C) $48.98
• D) $51.84

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