The Following Information Is Given About Options on the Stock $\sigma$

question 40

Multiple Choice

The following information is given about options on the stock of a certain company.
S₀ = 23 X = 20
r_c = 0.09 T = 0.5
$\sigma$ ² = 0.15
No dividends are expected.
Use this information to answer questions 1 through 8.
-If we now assume that the stock pays a dividend at a known constant rate of 3.5 percent,what stock price should we use in the model? (Due to differences in rounding your calculations may be slightly different."none of the above" should be selected only if your answer is different by more than 10 cents. )

• A)22.60
• B)19.65
• C)23.00
• D)21.99
• E)none of the above

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Definitions:

Achievable

Refers to a goal or task that is possible to accomplish or attain with the available resources, skills, or conditions.

Transferred Excitation

a psychological phenomenon where arousal from one situation is carried over and influences reactions in another situation.

Emotional Reaction

An individual's immediate expressive response to a significant event, influenced by their personal feelings.

Leftover Arousal

The residual physiological and emotional arousal that persists after the initial stimulus or event has concluded.