A Stock with a Current Price of $38 Will Either

question 48

Multiple Choice

A stock with a current price of $38 will either move up by a factor of 1.10 or down by a factor of .90 each period over the next two periods. The risk-free rate of interest is 4 percent. What is the current value of a call option with a strike price of $40?

• A) $2.36
• B) $2.52
• C) $2.71
• D) $3.09
• E) $3.13

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