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

question 37

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. Suppose the gross risk-free rate of interest per time-step is 1.04. In this setting, the price of a two-period cash-or-nothing binary put option with a strike of 100 that pays $100 if it finishes in-the-money is

• A) $36.
• B) $33.28
• C) $64.
• D) $59.17.

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Definitions:

Internal-Unstable

Attributes related to factors within an individual that can vary, such as effort or mood, influencing their behavior or achievements.

Internal-Stable

A term related to attribution theory, indicating a belief that one's behavior or event outcome is due to personal factors that are consistent over time.

External-Unstable

Characteristics of attributions referring to causes outside oneself that are variable and can change over time.

Self-Fulfilling Prophesy

A prediction that directly or indirectly causes itself to become true, due to the positive feedback between belief and behavior.