A Share of Stock Is Currently Priced at $20 and Will

question 45

Multiple Choice

A share of stock is currently priced at $20 and will change with equal likelihood to either $50 or $10.A call option with a $25 exercise price is available on the stock.How many shares of stock must be purchased to replicate the payoff from owning one call option?

• A) .50 share
• B) .75 share
• C) .80 share
• D) 1.25 shares

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Definitions:

Channels

Mediums or pathways through which messages are communicated from sender to receiver, such as verbal, non-verbal, written, and digital forms.

Receiver

In communication, the individual or group who interprets and attempts to understand the message sent by another person or entity.

Sender

In the context of communication, the person or entity that initiates the message being conveyed to another party.

Encoder

A device or algorithm that converts data or signals from one format into another for the purposes of standardization, speed, or security.