Consider a Binomial World in Which the Current Stock Price

question 22

Multiple Choice

Consider a binomial world in which the current stock price of 80 can either go up by 10 percent or down by 8 percent.The risk-free rate is 4 percent.Assume a one-period world.Answer questions 12 through 15 about a call with an exercise price of 80.
-What is the hedge ratio?

• A)0.429
• B)0.714
• C)0.571
• D)0.823
• E)none of the above

Grasp the concept of budget revision methods including continuous and rolling budgets.

Identify the purposes and impacts of both operating and capital expenditure budgets on financial planning.

Understand the principles and practices of effective budget preparation and control.

Recognize the effects of various budgeting approaches on cost management and performance evaluation.

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Definitions:

Chapter 7

A chapter under the U.S. Bankruptcy Code that deals with the process of liquidation, where a debtor's assets are sold off to pay creditors.

Debtor's Estate

All legal or equitable interests of the debtor in property at the time of bankruptcy filing.

Involuntary Petitions

Legal filings typically used in bankruptcy laws, forcibly initiating bankruptcy proceedings against a debtor by creditors.

Chapter 7

A provision of the bankruptcy code that provides for "liquidation," wherein a debtor's non-exempt assets are sold and the proceeds distributed to creditors.