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

question 3

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. If there are no dividends, what is the early-exercise premium of a 100-strike, six-month American call option?

• A) $0
• B) $0.15
• C) $0.25
• D) $0.50

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Definitions:

Behavioral Genetics

The field of study that examines the role of genetic and environmental influences on behaviors.

Genetic Screening

The process of testing individuals or populations for genetic disorders, susceptibilities, or potential traits.

Chromosomal Abnormalities

Variations in the number or structure of chromosomes, often leading to genetic disorders.

Heritable Disorders

Genetic conditions that can be passed down from one generation to the next, often involving abnormalities in DNA.