Exhibit 14-3 USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION(S)

question 86

Multiple Choice

Exhibit 14-3
USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION(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, a call option on the stock has an exercise price of $65. The stock is equally likely to rise by 15% or fall by 15% during each six month period. The one-year risk free rate is 3%.
-Refer to Exhibit 14-3. Calculate the price of the call option after the stock price has already moved up in value once (C_d) .

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

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Definitions:

Mental Speed Tasks

Cognitive exercises or tests designed to measure the quickness of an individual's thought processes, decision-making, and reaction times.

Simple Reaction Time

The time taken for an individual to respond to a single stimulus, such as light or sound, with a predetermined response.

Choice Reaction Time

The measurement of time elapsed between the presentation of a stimulus and the initiation of a response, where multiple stimuli and possible responses exist.

Inspection Time

The minimal amount of time an individual requires to discriminate between two stimuli, often used as a measure of processing speed or cognitive efficiency.