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

question 4

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 hedge ratio and the put option's value are given by:

• A) -0.2523 for the hedge ratio and $2.35 for the put option's value
• B) 0.2523 for the hedge ratio and $4.81 for the put option's value
• C) 0.5190 for the hedge ratio and $5.59 for the put option's value
• D) -0.5190 for the hedge ratio and $5.59 for the put option's value
• E) None of these answers are correct.

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Definitions:

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Items that have been taken without permission or acquired illegally, typically with the intent to sell for profit.

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Statement of Opinion

A declaration that reflects someone's personal belief, perspective, or judgment, rather than an objective fact.

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