Suppose That in a Binomial Model,the Stock Moves Up by a Factor

question 14

Multiple Choice

Suppose that in a binomial model,the stock moves up by a factor $u = e ^{ ? \sqrt { h }}$ and down by a factor $d = e ^ { - \sigma - \sqrt { h } }$ ,where $h$ is time in years.Letting $h =$ one month and $u = 1.05$ ,what is the annualized volatility $\sigma$ of the stock?

• A)6.93%
• B)10.39%
• C)13.86%
• D)16.90%

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Definitions:

Transfers

The process of moving employees from one job, location, or department to another within the same organization.

Early Retirement

The act of leaving the workforce before the traditional retirement age, often with incentive packages offered by employers.

Labor Surplus

A situation where the number of available workers exceeds the number of available jobs, often leading to unemployment or underemployment.

Work Sharing

A program that allows employees to reduce working hours during economic downturns as an alternative to layoffs, with the aim of spreading a reduced amount of work over the same or a larger number of employees.