The Current Stock Price of KMW Is $27, the Risk-Free

question 16

Multiple Choice

The current stock price of KMW is $27, the risk-free rate of return is 4%, and the standard deviation is 30%. What is the price of a 63-day call option with an exercise price of $25?

• A) $2.50
• B) $2.65
• C) $2.89
• D) $3.12

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Definitions:

Soda Tax

Government-imposed tax on sugary beverages to combat obesity and health issues while generating revenue.

Sugary Drinks

Beverages containing added sugars such as sodas, sports drinks, and fruit-flavored drinks, often linked to health issues like obesity and diabetes.

Interstate Commerce Commission

A former agency of the U.S. government responsible for regulating the economics and services of specified carriers engaged in transportation between states.

Legislation

Laws or statutes enacted by a legislative body, such as a parliament or congress, that govern behavior and processes within a jurisdiction.