What Is the Current Value of a Six-Month Call Option

question 37

Multiple Choice

What is the current value of a six-month call option with an exercise price of $15? The six-month risk-free interest rate is 5% per six-month period.[Use the replicating portfolio method.]

• A)$8.73
• B)$10.28
• C)$16.88
• D)$13.33

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Definitions:

End Customer

The end customer is the final recipient or user of a product or service, typically who purchases or benefits directly from the goods or services.

Last Mile Delivery

The final step of the delivery process where goods are transported from a transportation hub to the final delivery destination, typically a personal residence.

Distributor Storage

A storage model where goods are stored by a distributor or wholesaler rather than at the manufacturer's or retailer's premises.

Distributor Storage

A logistic strategy where products are stored at distributor warehouses, allowing for quicker delivery to customers as compared to direct manufacturer shipments.