A Stock Is Trading at 100 $u = 1.20$ And $d = 0.80$

question 27

Multiple Choice

A stock is trading at 100. Consider a two-period binomial model in which the stock price moves up or down each period by factors $u = 1.20$ and $d = 0.80$ , respectively. The gross risk-free rate of interest per time step is 1.04. You are long a cash-or-nothing digital call option that pays $100 if $S _ { T } \geq 100$ , and nothing otherwise; and short a cash-or-nothing digital put option that pays $100 if $S _ { T } \leq 100$ , and nothing otherwise. (Here, $S _ { T }$ is the stock price at the end of two periods.) The value of your portfolio is

• A) Positive.
• B) zero.
• C) Negative.
• D) Cannot be calculated from the given information.

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Definitions:

Cost Per Hire

The total expenses incurred by an organization to fill a job vacancy, divided by the number of hires, including advertising, recruiting, and administrative costs.

Direct Costs

Costs directly associated with the manufacture of particular products or services, including labor and raw materials.

Apportioned Costs

Expenses that are divided and allocated among different departments, projects, or processes within an organization based on agreed-upon criteria.

Human Resource Plans

Strategic documents outlining how an organization intends to manage its workforce to meet its business goals, including staffing, development, and compensation strategies.