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Suppose ABCD's Stock Price Is Currently $50

Question 63

Multiple Choice

Suppose ABCD's stock price is currently $50. In the next six months it will either fall to $40 or rise to $80. What is the current value of a six-month call option with an exercise price of $50? The six-month risk-free interest rate is 2 percent (periodic rate) .


A) $2.40
B) $15.00
C) $8.25
D) $8.09

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