A Stock with a Stock and Exercise Price of $20

question 58

Multiple Choice

A stock with a stock and exercise price of $20 can either increase to $26 or decrease to $18 over the course of one year. In a one-period binomial option model, given an interest rate of 5% and equal probabilities, what is the likely option price? (Use annual compounding.)

• A) $2.36
• B) $2.50
• C) $2.88
• D) $3.00

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Definitions:

Codes of Behaviour

Established rules or standards governing the actions or conduct of individuals within a group or society.

Internal Social Control

Regulates people through socialization and shapes people’s minds so they come to regard deviant actions as undesirable.

Importance of Learning

The significance attached to acquiring knowledge and skills, emphasizing its role in personal development, career advancement, and societal progress.

Grounding

In a psychological context, it refers to techniques used to bring someone fully into the present and calm the mind, often used in managing anxiety or stress.