In a One-Period Binomial Model, Assume That the Current Stock

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 the risk-free rate is 0.1668% per month in simple terms, which of the following choices best describes the replicating portfolio for one hundred 99-strike one-month call options?

A) Long 50 shares of stock and long 50 units of $1 bonds.
B) Long 55 shares of stock and long 49 units of $1 bonds.
C) Long 55 shares of stock and short 49 units of $1 bonds.
D) Long 55 shares of stock and short 50 units of $1 bonds.