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

question 55

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 put option that expires in one period and has an exercise price of $36?

• A)$1.55
• B)$1.50
• C)$3.00
• D)$0.51
• E)$2.49

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Definitions:

Illness Anxiety Disorder

A psychological disorder characterized by excessive concern about having a serious illness, despite medical tests showing no evidence of such illness.

Tickling Sensation

A complex sensory response to light touch or stroking, often resulting in involuntary laughter or movements to avoid the stimulus.

Borderline Personality Disorder

A personality disorder characterized by instability in relationships, self-image, mood, and lack of impulse control.

Antisocial Personality Disorder

A mental condition where an individual consistently shows no regard for right and wrong and ignores the rights and feelings of others.