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

question 13

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,suppose that a trader quotes a put price of $5.Then the arbitrage profit that you can make today by trading this call and related securities is:

• A) $0
• B) $0.33
• C) $0.59
• D) $1.54
• E) None of these answers are correct.

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The allocation of resources, usually financial, in the expectation of generating an income or profit, including purchases of financial instruments or capital assets.

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The amount of a loan that is subject to interest charges for the borrower, often shown as a yearly percentage.

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