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One Year from Now, a Stock Is Expected to Be

Question 215

Multiple Choice

One year from now, a stock is expected to be priced at either $36 or $49. Currently the stock is selling for $38.20 while Treasury bills are yielding 2.5%. What is the value of a twelve-month call option with an exercise price of $40?


A) $0
B) $1.44
C) $2.13
D) $3.08
E) $4.45

Correct Answer:

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