Assume the Following Data: Stock Price = $50; Exercise Price

question 37

Multiple Choice

Assume the following data: Stock price = $50; Exercise price = $45; Risk-free rate = 6 percent per year; Continuously compounded variance = 0.2; Expiration = three months. Calculate the value of a European call option. (Use the Black-Scholes formula.)

• A)$7.62
• B)$7.90
• C)$5
• D)$5.92

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Definitions:

Disjunctive

Describes a relationship or situation where elements are disconnected or distinct from one another.

Compensatory

Related to making up for a deficiency or lack in one area by excelling or overperforming in another area.

Köhler Effect

A phenomenon in group dynamics where less capable members increase their effort when working collectively, motivated by the desire to contribute to the group's success.

Conjunctive Task

A task in which the performance of the group depends on the least capable member, requiring all members to contribute for success.