Suppose a Stock Is Currently Trading for $12,and in One

question 91

Multiple Choice

Suppose a stock is currently trading for $12,and in one period it will either increase to $15 or decrease to $8.If the one-period risk-free rate is 4%,what is the price of a European put option that expires in one period and has an exercise price of $10?

• A)$0.96
• B)$1.92
• C)$1.00
• D)$2.00
• E)$0.69

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Advocacy

The act of publicly supporting or recommending a particular cause or policy.

Direct Democracy

A type of democracy in which all of the people directly make laws and govern themselves.

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A principle in democratic societies where laws are created through the direct or indirect participation of citizens, either by voting in referendums or electing representatives.

State of Nature

A philosophical concept describing the hypothetical conditions of human life before societies came into existence.