A Stock Is Currently Trading at $100 $u = 1.10$ Or Fall by a Factor Of

question 31

Multiple Choice

A stock is currently trading at $100.In each month,the stock will either increase in price by a factor of $u = 1.10$ or fall by a factor of $d = 0.90$ .The risk-free rate of interest per month is 0.1668% in simple terms,i.e. ,an investment of $1 at the risk-free rate returns $1.001668 after one month.What is the price of a 100-strike,six-month European call option when a dividend of $1 is paid at the end of each month? (Assume that if the option is exercised,it is done just before a dividend payment. )

• A)$7.20
• B)$7.50
• C)$7.70
• D)$8.20

---

Definitions:

Morphostasis

Stability in a system.

Enmeshed Families

Characterizes a family system with overly close and intertwined relationships, where boundaries are blurred, leading to a lack of independence among family members.

Overbonded

Excessively close emotional attachments that can potentially hinder an individual's autonomy and personal growth.

Homeostasis

The process by which a biological system maintains stability while adjusting to conditions that are optimal for survival.