The Current Price of a Stock Is $22, and at the End

question 24

Multiple Choice

The current price of a stock is $22, and at the end of one year its price will be either $27 or $17.The annual risk-free rate is 6.0%, based on daily compounding.A 1-year call option on the stock, with an exercise price of $22, is available.Based on the binomial model, what is the option's value? (Hint: Use daily compounding.)

• A) $2.43
• B) $2.70
• C) $2.99
• D) $3.29
• E) $3.62

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Definitions:

Sarcopenia

The loss of muscle mass and strength that occurs with aging.

Muscles Weaken

The reduction in strength or efficacy of muscle tissue, often due to aging, illness, or lack of use.

Huntington's Disease

A hereditary and progressive brain disorder that affects movement, cognitive function, and psychiatric health.

Muscular Dystrophy

A group of genetic diseases characterized by weakness and progressive degeneration of muscle tissue, affecting physical mobility.