Consider a Stock That Is Trading at $50,has a Volatility

question 11

Multiple Choice

Consider a stock that is trading at $50,has a volatility of 0.5,and pays no dividends.The risk-free rate is 4%.If the beta of the stock is 1.1,what is the beta of a 52-strike,one-year call option on this stock?

• A)0.55
• B)1.1
• C)3.3
• D)4.4

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Definitions:

Linear Demand Curve

A graphical representation showing a straight-line relationship between the price of a good and the quantity demanded.

Marginal Revenue

The increase in total revenue resulting from selling one additional unit of a product or service.

Elastic Portion

The elastic portion of a demand or supply curve represents the range where the quantity demanded or supplied responds significantly to changes in price.

Revenue Curves

Graphical representations showing the relationship between different levels of output or sales and the total revenue earned by a company.