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Consider a Three-Period Binomial Model of 12 Months

Question 15

Multiple Choice

Consider a three-period binomial model of 12 months.Assume the stock price is $37.50,σ = 0.20,r = 0.05 and the exercise price of a call option is $35.What is the forecasted price of the stock at the node after two consecutive upward movements of the stock price?


A) $38.68
B) $42.80
C) $48.84
D) $50.06

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