Exhibit 14-2 USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION(S)

question 79

Multiple Choice

Exhibit 14-2
USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION(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, a call option on the stock has an exercise price of $45. The stock is equally likely to rise by 25% or fall by 25%. The one-year risk free rate is 2%.
-Refer to Exhibit 14-2. Calculate the price of the call option today (C₀) .

• A) $7.56
• B) $17.48
• C) $9.26
• D) $5.0
• E) $17.15

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Definitions:

Vertebral Foramen

The central opening or hole in each vertebra of the spine through which the spinal cord passes.

Spinal Cord

A long, thin, tubular structure made up of nervous tissue, which extends from the medulla oblongata in the brainstem down the vertebral column, facilitating neural connections between the brain and the body.

Vertebrae

The individual bones that make up the vertebral column, or spine, providing structural support and protection for the spinal cord.

Xiphoid Process

The xiphoid process is the small, cartilaginous projection at the lower end of the sternum, which becomes bony and ossified with age.