Binomial Pricing: Assume That the Shares of Gizmo Motors Are

question 14

Multiple Choice

Binomial pricing: Assume that the shares of Gizmo Motors are currently trading for $29 and will either rise to $32 or fall to $5 in one year. The risk-free rate for one year is 2 per cent. What is the value of a put option with a strike price of $30?

• A) $0
• B) $0.41
• C) $1.78
• D) $2.20

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