The Current Stock Price of Johnson and Johnson Is $64

question 38

Multiple Choice

The current stock price of Johnson and Johnson is $64 and the stock does not pay dividends. The instantaneous risk free rate of return is 5%. The instantaneous standard deviation of J&J's stock is 20%. You wish to purchase a call option on this stock with an exercise price of $55 and an expiration date 73 days from now.
-The stock price of Ajax Inc.is currently $105.The stock price a year from now will be either $130 or $90 with equal probabilities.The interest rate at which investors can borrow is 10%.Using the binomial OPM,the value of a call option with an exercise price of $110 and an expiration date one year from now should be worth __________ today.

• A) $11.59
• B) $15.00
• C) $20.00
• D) $40.00

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Definitions:

Long-Term Health

The aspect of health that involves enduring wellness and absence of chronic diseases or conditions over a significant period.

Process Focused

An approach or method that is primarily concerned with the procedures and steps followed to achieve a specific goal.

Standardize

The process of establishing and implementing technical standards to ensure consistency and compatibility across systems, products, or services.

Expectations

The beliefs or assumptions about what should happen in the future regarding the performance or outcomes of a project.