Multiple Choice
Assume we have a stock currently worth $100. We also assume the interest rate is zero, and we can buy options for this stock with a strike price of $100. If the stock can rise or fall by $5 with equal probability over the option period, and the option cannot be exercised until the expiration date, what is the time value of the option?
A) $10
B) $5
C) $0
D) None of the answers is correct.
Correct Answer:
Verified
Correct Answer:
Verified
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