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Consider a One-Period Binomial Model of 6 Months

Question 2

Multiple Choice

Consider a one-period binomial model of 6 months.Assume the stock price is $45.00,σ = 0.20,r = 0.06 and the stock's expected return is 12.0%.What is the discount rate for a $45.00 strike European call option (Y) ?


A) 38.2%
B) 39.1%
C) 42.5%
D) 45.6%

Correct Answer:

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