Using the Binomial Pricing Model,the Calculated Price of a One-Year

question 42

Multiple Choice

Using the binomial pricing model,the calculated price of a one-year put option on KD stock with a strike price of $20 is closest to:

• A)-7.7
• B)2.4
• C)4.6
• D)-1.8

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Definitions:

Mode

The value that appears most frequently in a data set. A mode can be used as a measure of central tendency, especially for categorical data.

Histogram

A type of graph that represents the distribution of numerical data by showing the number of data points that fall into various ranges or bins.

Skewed Distribution

A type of distribution in which data points are not symmetrically distributed around the mean, typically tilting to the left (negatively skewed) or to the right (positively skewed).

Deviations

Differences between observed values and the average of those values, indicating the spread of a dataset.