A Stock with a Current Price of $32 Will Either

question 53

Multiple Choice

A stock with a current price of $32 will either move up to $40.00 or down to $30 over the next period.The risk-free rate of interest is 3 percent.What is the value of a call option with a strike price of $35?

• A) $1.30
• B) $1.44
• C) $1.87
• D) $2.09
• E) $2.41

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Definitions:

Foreseeable Risk

A potential danger or issue that a reasonable person would anticipate in a given set of circumstances, often discussed in negligence and tort cases.

Compensatory Damages

Money awarded equivalent to the actual value of injuries or damages sustained by the aggrieved party.

Doctrine

A principle or body of principles presented for acceptance or belief, as by a religious, philosophical, scientific, or political group.

Liability

A legal responsibility or obligation, which can be civil or financial in nature.