Mary Wagers to Pay One Share of Stock to Matt

question 7

Multiple Choice

Mary wagers to pay one share of stock to Matt if the price at expiration in 1 year is above $75.00.Assume S(0) = 60.00,σ = 0.15,r = 0.04,and dividend rate = 0.01.What is the value of Mary's bet?

• A) $6.55
• B) $7.55
• C) $8.55
• D) $9.55

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