USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 60

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The information provided is relevant in the context of a one period (one year) binomial option pricing model. A stock currently trades at $50 per share, and a call option on the stock has an exercise price of $45. The stock is equally likely to rise by 25 percent or fall by 25 percent. The one-year, risk-free rate is 2 percent.
-Refer to Exhibit 16.5. Calculate the possible prices of the stock one year from today.

• A) $37.50 or $17.50.
• B) $62.50 or $37.50.
• C) $62.50 or $17.50.
• D) $50 or $45.
• E) None of the above.

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Definitions:

Synesthesia

A neurological condition where stimulation of one sensory or cognitive pathway leads to automatic, involuntary experiences in a second pathway.

Dissociation

A psychological experience of disconnection or detachment from one's thoughts, feelings, memories, or sense of identity.

Embodied Cognition

The theory that cognitive processes are deeply rooted in the body's interactions with the world, suggesting that the mind must be understood in the context of its relationship to a physical body.

McGurk Effect

A perceptual phenomenon demonstrating an interaction between hearing and vision in speech perception.