A Stock with a Current Price of $18 Will Either

question 62

Multiple Choice

A stock with a current price of $18 will either move up by a factor of 1.2 or down by a factor of 0.9 each period over the next two periods.The risk-free rate of interest is 4.5 percent.What is the current value of a call option with a strike price of $20?

• A) $1.02
• B) $1.08
• C) $1.17
• D) $1.21
• E) $1.27

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Definitions:

Hearing Aid

A device designed to improve hearing by making sound audible to a person with hearing loss.

Warranty

A guarantee provided by a manufacturer or seller regarding the condition of a product and a promise of repair or replacement within a specified period of time.

Side Rails

Metal or plastic guards that attach to the sides of a hospital bed to prevent patients from rolling out of bed and to assist them in repositioning themselves.

Call Bell

A device used by patients to alert or call for medical staff assistance, commonly found in hospitals and long-term care facilities.