The Current Stock Price of Howard & Howard Is $64

question 57

Multiple Choice

The current stock price of Howard & Howard is $64, and the stock does not pay dividends. The instantaneous risk-free rate of return is 5%. The instantaneous standard deviation of H&H's stock is 20%. You want to purchase a call option on this stock with an exercise price of $55 and an expiration date 73 days from now.
Using the Black-Scholes OPM, the call option should be worth ________ today.

• A) $0.01
• B) $0.08
• C) $9.26
• D) $9.62

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Definitions:

Encoding Specificity

The principle that recall is more effective when the context at the time of encoding is similar to the context at the time of retrieval.

Retrieval Cues

Stimuli that assist in the recall of information stored in memory, facilitating the access to memories.

Theta Waves

Brainwave activity in the frequency range of 4-7Hz, typically associated with drowsiness or the early stages of sleep.

Recency Effect

A cognitive bias that makes people more likely to remember the last items in a series.