In a One-Period Binomial Model, Assume That the Current Stock

question 7

Multiple Choice

In a one-period binomial model, assume that the current stock price is $100, and that it will rise to $110 or fall to $90 after one month. If an investment of a dollar at the risk-free rate returns $1.001668 after one month, what is the price of an Arrow security in the state where the stock price moves up?

• A) 0.4974
• B) 0.4983
• C) 0.5000
• D) 0.5075

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