Suppose a Stock Is Currently Trading for $35,and in One

question 7

Multiple Choice

Suppose a stock is currently trading for $35,and in one period it will either increase to $38 or decrease to $33.If the one-period risk-free rate is 6%,what is the price of a European call option that expires in one period and has an exercise price of $36?

• A)$1.55
• B)$0.80
• C)$2.00
• D)$1.63
• E)$1.00

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Definitions:

Addressing Format

Refers to the method and structure used to locate and reference memory locations or peripheral devices in computing systems.

Data Table

The part of processor memory that contains input and output values as well as files where data are monitored, manipulated, and changed for control purposes.

Processor

A central part of any computer or device, responsible for interpreting and executing instructions; it acts as the brain of the system.