A Stock Is Currently Trading at $100 $u = 1.10$ Or Fall by a Factor Of

question 28

Multiple Choice

A stock is currently trading at $100. In each month, the stock will either increase in price by a factor of $u = 1.10$ 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 delta of a 100-strike, three-month European call option?

• A) 0.4667
• B) 0.5000
• C) 0.5333
• D) 0.5667

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Definitions:

War With Mexico

Refers to the Mexican-American War (1846-1848), a conflict between the United States and Mexico, leading to the U.S. acquisition of territories in what is now the southwest United States.

Pre-war Mexican Land

Territories that were part of Mexico before wars, particularly the Mexican-American War, after which significant land was ceded to the United States.

Oregon Territory

A historic region on the Pacific Northwest coast of North America, claimed by several countries until becoming part of the United States in the 19th century.

Great Britain

An island in the North Atlantic Ocean that contains England, Scotland, and Wales, which together form the United Kingdom of Great Britain and Northern Ireland.