A Stock Is Currently Trading at $100 $u = 1.05$ Or Fall by a Factor Of

question 6

Multiple Choice

A stock is currently trading at $100. In each month, the stock will either increase in price by a factor of $u = 1.05$ or fall by a factor of $d = 0.90$ . The risk-free rate of interest per month is 0.1668% in simple terms, i.e., an investment of $1 at the risk-free rate returns $1.001668 after one month. What is the price of a 100-strike, two-month European put option?

• A) $2.36
• B) $3.36
• C) $4.36
• D) $5.36

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Definitions:

Simp

A slang term often used to describe someone who performs excessive sympathy or attention towards another person, typically someone they're romantically interested in, often with nothing in return.

Simp

A method of reducing complexity by focusing on the most essential aspects of something to understand or explain it better.

Conj

Short for "conjunction," it refers to a logical connective that joins two or more statements or propositions, requiring both or all to be true for the compound statement to be true.

Simp

A term used in internet slang to describe someone who performs excessive sympathy or attention towards another person, often without reciprocation.