USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 5

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The following information is provided in the context of a two-period (two six-month periods) binomial option pricing model. A stock currently trades at $60 per share, and a call option on the stock has an exercise price of $65. The stock is equally likely to rise by 15 percent or fall by 15 percent during each six-month period. The one-year risk free rate is 3 percent.
-Refer to Exhibit 16.2. Calculate the price of the call option today (C₀) .

• A) $7.77
• B) $14.35
• C) $0
• D) $4.21
• E) $6.44

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Definitions:

Heredity

The transmission of genetic characteristics from parents to offspring, influencing various physical and sometimes behavioral traits.

Chromosomes

Thread-like structures located inside the nucleus of animal and plant cells, made of protein and a single molecule of DNA, which carries genetic information.

Genes

Segments of DNA located in chromosomes, responsible for the genetic traits passed from parents to offspring.

Infant's Temperament

The innate personality traits and patterns of behavior that are observable in young children, influencing how they interact with their environment.