Binomial Pricing: Consider a Call Option and a Put Option

question 27

Multiple Choice

Binomial pricing: Consider a call option and a put option both written on C72 shares. Both options have a strike price of $20 and expire in one year. The shares of C72 are currently selling for $20. In one month the shares will be at either $24 or $18. The risk-free rate is 0 per cent. Which is worth more, the put option or the call option?

• A) The put option is worth more.
• B) The call option is worth more.
• C) They are worth the same.
• D) There is not enough information.

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Definitions:

Generalizability

The extent to which findings from a study can be applied or extended to broader populations, settings, or times.

Independent Variable

In research, a variable that is manipulated or changed to observe its effects on a dependent variable.

Levels Of Education

The classification of educational attainment as determined by the amount and type of schooling a person has completed, ranging from primary to tertiary education.

Better-Paid Work

Better-paid work refers to employment that offers higher wages or salary, typically in comparison to other jobs requiring similar skill levels or education.