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

question 9

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 square root of the stock price less the strike price (K = $6) if it has a positive value,zero otherwise,that is: max[ $\surd$ S(1) - 6,0].
The value of this exotic option is given by:

• A) $0.55
• B) $0.89
• C) $1.08
• D) $1.55
• E) None of these answers are correct.

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Definitions:

Pull Strategies

Marketing strategies aimed at creating demand among consumers first, encouraging them to actively seek out a product or brand, which in turn prompts retailers to stock it.

Push Strategies

Marketing strategies that involve "pushing" products towards consumers by ensuring visibility in distribution channels.

Tracking

Includes monitoring key indicators, such as daily or weekly sales volume, while the advertisement is running to shed light on any problems with the message or the medium.

Deceptive Practices

Unethical or fraudulent activities designed to deceive or mislead consumers, often for financial gain or competitive advantage.