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

question 25

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(a) the price of a 100-strike,three-month European put option,and(b) the price of a 100-strike,two-month European put option?

• A)$7.20 and $5.41,respectively.
• B)$7.20 and $5.08,respectively.
• C)$5.08 and $7.70,respectively.

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Definitions:

Adolescence Transition

The phase of life marking the psychological and physical transition from childhood to adulthood, characterized by significant developmental changes.

Identity Achievement

A status of self-understanding where an individual has gone through exploration of different identities and made commitments to particular goals, values, or beliefs.

Identity Diffusion

A stage in Erik Erikson's theory of psychosocial development where an individual has not yet achieved a sense of personal identity and direction.

Identity Foreclosure

A psychological term referring to a state in which an individual prematurely commits to an identity without adequate exploration of other options.