A Stock Priced at 50 Can Go Up or Down

question 14

Multiple Choice

A stock priced at 50 can go up or down by 10 percent over two periods.The risk-free rate is 4 percent.Which of the following is the correct price of an American put with an exercise price of 55?

• A)7.88
• B)3.38
• C)4.00
• D)5.00
• E)1.65

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Definitions:

Critical Path

In project management, it is the longest sequence of tasks that must be finished on time for the whole project to be completed on schedule.

Quickest Time

The shortest duration within which an action can be completed or a goal can be achieved.

Project Completion

The final stage of project management, signifying that all project objectives have been achieved and all deliverables are formally accepted.

What-If Calculations

Analytical processes used to explore the outcomes of different scenarios or decisions based on varying inputs or variables.