USe the Following Data for a Single-Period Binomial Model to Answer

question 17

Multiple Choice

USe the following data for a single-period binomial model to answer the questions that follow.
YBM's stock price S is $102 today.
- After six months,the stock price can either go up to $115.63212672,or go down to $93.52995844.
- Options mature after T = 6 months and have an exercise price of K =$105.
- The continuously compounded risk-free interest rate r is 5 percent per year.
-Given the above data,the pseudo-probability of an up movement and the discounted expected stock price using the pseudo-probabilities are given by:

• A) 0.50 for the pseudo-probability and 100 for the stock price
• B) 0.50 for the pseudo-probability and 102 for the stock price
• C) 0.45 for the pseudo-probability and 102 for the stock price
• D) 0.45 for the pseudo-probability and 105 for the stock price
• E) None of these answers are correct.