A Stock with a Current Price of $38 Will Either

question 26

Multiple Choice

A stock with a current price of $38 will either move up to $45.00 or down to $35 over the next period. The risk-free rate of interest is 3 percent. What is the value of a call option with a strike price of $40?

• A) $1.30
• B) $1.55
• C) $1.87
• D) $2.09
• E) $2.41

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Definitions:

Structuralism

A theory in psychology and sociology that sees structure as the main means of understanding human culture, behavior, and mind, initiated by Wilhelm Wundt and Edward Titchener.

Chemical Elements

Pure substances consisting of only one type of atom, distinguished by its atomic number, the number of protons in its nucleus.

Basic Elements

Fundamental components or parts that constitute an object, concept, or system.

Sensations

The physical feelings or perceptions resulting from something that happens to or comes into contact with the body.