Assume That the Stock of Statrec, Inc

question 34

Multiple Choice

Assume that the stock of Statrec, Inc., is currently trading for $2.60 and will either rise to $10 or fall to $0 in one year. The risk-free rate for one year is 1 percent. What is the value of a put option with a strike price of $5? (Do not round intermediate computations. Round final answer to two decimal places.)

• A) $0
• B) $2.35
• C) $3.65
• D) $3.80

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Definitions:

Generalization

The process of applying the principles learned from specific instances to broader and different situations.

Discrimination

In psychology, the ability to distinguish between different stimuli and respond appropriately according to their differences.

Modeling Effect

Learning a new behavior from a model through the acquisition of new responses.

Disinhibitory Effect

Describes the phenomenon where observing a model being rewarded for a prohibited or inhibited behavior increases the likelihood of the observer engaging in that behavior.