Consider a Three-Period Binomial Model of 12 Months

question 15

Multiple Choice

Consider a three-period binomial model of 12 months.Assume the stock price is $37.50,σ = 0.20,r = 0.05 and the exercise price of a call option is $35.What is the forecasted price of the stock at the node after two consecutive upward movements of the stock price?

• A) $38.68
• B) $42.80
• C) $48.84
• D) $50.06

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Definitions:

Endocrine System

The body’s “slow” chemical communication system; a set of glands that secrete hormones into the bloodstream.

Nervous System

The network of nerve cells and fibers that transmits nerve impulses between parts of the body, facilitating communication and response to external and internal stimuli.

Receptors

Proteins located on the surface of cells or within cells that bind to specific substances and trigger a response in the cell.

Oxytocin

A hormone often associated with bonding, love, and social connection, playing a key role in human relationships.