The Current Price of a Stock Is $22,and at the End

question 28

Multiple Choice

The current price of a stock is $22,and at the end of 1 year its price will be either $27 or $17.The annual risk-free rate is 6.0%,based on daily compounding.A 1-year call option on the stock,with an exercise price of $22,is available.Based on the binominal model,what is the option's value?

• A)$2.43
• B)$2.70
• C)$2.99
• D)$3.29

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Definitions:

Condition-Controlled

A loop that executes as long as a specific condition remains true.

Sentinel-controlled

Describes a loop or sequence that continues execution until a sentinel value is encountered.

Condition-controlled Loop

A loop that continues execution as long as a specified condition remains true.

Terminate the Loop

Refers to ending the execution of a loop before its natural conclusion, often through a break statement.