Financial Management 534 Final Exam Part 1
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Financial Management 534 Final Exam Part 1 1
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Question 1
The current price of a stock is $22, and at the end of one year its price will be either $27 or $17. The annual risk-free rate is 6.0%, based on daily compounding. A 1-year call option on the stock, with an exercise price of $22, is available. Based on the binomial model, what is the option's value? (Hint: Use daily compounding.)
$2.43
$2.70
$2.99
$3.29
$3.62
Question 2
Suppose you believe that Florio Company's stock price is going to decline from its current level of $82.50 sometime ...
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Financial Management 534 Final Exam Part 1•Financial Management 534 Final Exam Part 1
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Question 1
The current price of a stock is $22, and at the end of one year its price will be either $27 or $17. The annual risk-free rate is 6.0%, based on daily compounding. A 1-year call option on the stock, with an exercise price of $22, is available. Based on the binomial model, what is the option's value? (Hint: Use daily compounding.)
$2.43
$2.70
$2.99
$3.29
$3.62
Question 2
Suppose you believe that Florio Company's stock price is going to decline from its current level of $82.50 sometime ...