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:

Stakeholders

The persons, groups, and other organizations that are directly affected by the behaviour of the organization and that hold a stake in its performance.

Strategic Accomplishments

Achievements that significantly contribute to the fulfillment of key goals or objectives within a strategic plan.

Corporate Strategy

The overarching plan or direction a corporation takes to achieve its goals and maximize value for its stakeholders.

Industries

Refers to the various categories of economic activity that are characterized by distinct types of business operations, such as manufacturing, technology, health care, and finance.