The Current Price of a Stock Is $50

question 22

Multiple Choice

The current price of a stock is $50.Every month,the stock price will rise by a factor of 1.2 or fall by a factor of 0.8;and a $1 risk-free investment will be worth $1.03.Dividends are paid as a proportion of 0.02 of the stock price.What is the early-exercise premium on the 49-strike,six-month American call?

• A)$0.00
• B)$0.02
• C)$0.06
• D)$0.11

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Definitions:

Informational Social Influence

The process of changing one's behavior or beliefs in order to align with perceived group norms, based on the desire for accuracy rather than conformity.

Normative Social Influence

The effect of people around us compelling us to adapt so as to be favored and included by them.

Deindividuation

A psychological state characterized by reduced self-awareness and decreased personal accountability, often occurring within groups.

Social Facilitation

The tendency for people to perform differently when in the presence of others than when alone, typically showing improvement in performance on simple tasks.