Use the Following Data for a Two-Period Binomial Model to Answer

question 8

Multiple Choice

Use the following data for a two-period binomial model to answer the questions that follow.
- The stock's price S is $100.After three months,it either goes up and gets multiplied by the factor U = 1.13847256,or it goes down and gets multiplied by the factor
D = 0.88664332.
- Options mature after T = 0.5 year and have a strike price of K = $105.
- The continuously compounded risk-free interest rate r is 5 percent per year.
-If the stock pays a $1 dividend just before the end of the first three months,then today's price of a European put is:

• A) $2.44
• B) $5.73
• C) $9.12
• D) $16.03
• E) None of these answers are correct.

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Definitions:

Uremic Frost

A rare dermatological condition that occurs due to an accumulation of urea on the skin's surface in advanced kidney failure.

Urea Crystals

Small, often whitish crystals that can form on the skin, especially in newborns, due to concentrated urine.

Chronic Renal Failure

A long-term medical condition where the kidneys lose their ability to filter waste and excess fluids from the blood effectively.

Chronic Renal Failure

A long-term decline in kidney function, which can lead to the accumulation of waste products and fluid imbalances in the body.