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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