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

question 16

Multiple Choice

Use the following data for a single-period binomial model to answer the questions that follow.
- The stock's price S is $50.After three months,it either goes up by the factor U = 1.16038286 or it goes down by the factor D = 0.85963276.
- Options mature after T =0 0.25 years.
- The continuously compounded risk-free interest rate r is 4 percent per year.
-Given the above data,consider an exotic option whose payoff at expiration is given by the stock price S(1) squared less a strike price (K= $2,500) if it has a positive value,zero otherwise,that is: max[S(1) ²- 2500,0].
The value of this exotic option is given by:

• A) $350.06
• B) $428.92
• C) $451.92
• D) $676.50
• E) None of these answers are correct.

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Definitions:

Mechanical Ventilation

A method of supporting a patient's breathing using a machine that moves breathable air into and out of the lungs.

Minimal Leak Method

A technique, often used in ventilated patients, to ensure minimal air leakage around the tracheal tube cuff by adjusting the cuff pressure.

Prevents Aspiration

The prevention of foreign substances from entering the airway and lungs, which can cause aspiration pneumonia or choking.

Prevents Air Escape

A characteristic of certain medical devices or procedural techniques designed to prevent the unintended release of air from the respiratory system or other body cavities.