Multiple Choice
Suppose VS's stock price is currently $20. In the next six months it will either fall by 50 percent or rise by 50 percent. What is the current value of a call option with an exercise price of $15 and expiration of one year? The six-month risk-free interest rate is 5 percent (periodic rate) . Use the two-stage binomial method.
A) $5.00
B) $2.14
C) $7.86
D) $8.23
Correct Answer:
Verified
Correct Answer:
Verified
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