Assume S = $51,K = $50,div = 0

question 3

Multiple Choice

Assume S = $51,K = $50,div = 0.0,r = 0.05,σ = 0.20,and 55 days until expiration.What is the premium on a knock-in call option with a down-and-in barrier of $48?

• A) $0.175
• B) $0.185
• C) $0.195
• D) $0.205

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Definitions:

External Benefits

Advantages or positive effects that a transaction or activity provides to people not directly involved in it.

Market Price

The current price at which an asset or service can be bought or sold in a specific market.

Market Output

The total amount of goods and services produced and offered for sale by all firms in a particular market.

External Cost

Costs that are not borne by the parties involved in an economic transaction but by other members of society.