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:

Skinner-behaviorism

A theory of learning based on the idea that all behaviors are acquired through conditioning, proposed by B.F. Skinner.

Freud-Gestalt Psychology

An approach that incorporates elements of Freud's psychoanalytic theory and Gestalt psychology, focusing on unconscious processes and perceptions in understanding behavior.

Classical Conditioning

A learning approach whereby two stimuli are consistently associated together; the second stimulus initially generates a response which ultimately is generated by the first stimulus alone.

Cognitive Development

The process through which individuals acquire and evolve in their problem-solving abilities, memory, language, and understanding of the world.