The Share Price of Ajax Inc

question 16

Multiple Choice

The share price of Ajax Inc. is currently $105. The share price a year from now will be either $130 or $90 with equal probabilities. The interest rate at which investors can borrow is 10%. Using the binomial OPM, the value of a call option with an exercise price of $110 and an expiration date one year from now should be worth ________ today.

• A)$11.59
• B)$15.00
• C)$20.00
• D)$40.00

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Definitions:

Stop Pushbutton

A control button used to halt or stop a machine or process, often designed to be easily accessible and requiring manual activation.

Start Pushbutton

A button that, when pressed, initiates the starting sequence of a machine or device.

Control Circuit

An electrical circuit designed to control the operation of a device by regulating the flow of electricity to it.

Analog Inputs

Inputs that can receive and process analog signals, converting physical phenomena like temperature or pressure into a readable format by an electronic device.