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Consider a One-Period Binomial Model of 12 Months

Question 3

Multiple Choice

Consider a one-period binomial model of 12 months.Assume the stock price is $54.00,σ = 0.25,r = 0.04 and the exercise price of a call option is $55.What is the forecasted price of the stock given a downward movement during the year?


A) $43.77
B) $ 45.28
C) $48.98
D) $51.84

Correct Answer:

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