The Current Stock Price of International Paper Is $69 and the Stock

question 5

Multiple Choice

The current stock price of International Paper is $69 and the stock does not pay dividends. The instantaneous risk free rate of return is 10%. The instantaneous standard deviation of International Paper's stock is 25%. You wish to purchase a call option on this stock with an exercise price of $70 and an expiration date 73 days from now.
-Using the Black-Scholes OPM,the put option should be worth __________ today.

• A) $1.50
• B) $2.88
• C) $2.55
• D) $3.00

---

Definitions:

Regression Slope Coefficient

A parameter in regression analysis that represents the change in the dependent variable for a one-unit change in an independent variable.

Simple Linear Regression

A statistical method to model the relationship between two variables by fitting a linear equation to observed data.

Statistically Significant

A term used to indicate that the probability of the observed data, or something more extreme, happening by chance is low under the null hypothesis.

Stochastic Relationship

A relationship between variables or processes that involves randomness, implying that predictions can only be made probabilistically.