Multiple Choice
In a one-period binomial model,assume that the current stock price is $100,and that it will rise to $110 or fall to $90 after one month.If an investment of a dollar at the risk-free rate returns $1.001668 after one month,how many 100-strike one-month call options and how many units of the stock will be needed to be combined to obtain a riskless $1 portfolio?
A) Long 0.02 calls and long 0.01 shares.
B) Long 0.01 calls and long 0.02 shares.
C) Short 0.01 calls and short 0.02 shares.
D) Short 0.02 calls and long 0.01 shares.
Correct Answer:
Verified
Correct Answer:
Verified
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