In a One-Period Binomial Model,assume That the Current Stock Price

question 4

Multiple Choice

In a one-period binomial model,assume that the current stock price is $100,and that it will rise to $110 or fall to $90 after one month.If an investment of a dollar at the risk-free rate returns $1.001668 after one month,what is the price of an Arrow security in the state where the stock price moves up?

• A)0.4974
• B)0.4983
• C)0.5000
• D)0.5075

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Definitions:

Rhizoids

Hair-like extensions from the lower surface of bryophytes and some algae that serve as anchors and absorb water and nutrients from the soil.

Gymnosperms

A group of seed-producing plants that includes conifers, cycads, ginkgo, and gnetophytes, characterized by seeds that are not enclosed by an ovary or fruit.

Flowering Plants

Plants that produce flowers as their reproductive structures; members of the angiosperm lineage.

Diploid Generation

The phase in the life cycle of a plant or algae that has a double set of chromosomes, typical of the sporophyte generation.