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

question 85

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 today (C₀) .

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

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Definitions:

Short-Term Memory

Short-term memory refers to the capacity for holding a small amount of information in an active, readily available state for a short period of time.

Consciousness

The state of being aware of and able to think about one's own existence, sensations, thoughts, surroundings, etc.

Long-Term Memory

A type of memory that holds information for long periods, potentially indefinitely, divided into explicit (conscious) and implicit (unconscious) memories.

Words Like

Likely pertains to lexical studies or exercises involving the identification of synonyms, antonyms, or associated words based on meaning or usage.