The current price of a stock is $22, and at the end of one year its price

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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 binominal model, what is the option's value?

a. $2.43

b. $2.70

c. $2.99

d. $3.29

e. $3.62

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Corporate Finance A Focused Approach

ISBN: 978-1439078082

4th Edition

Authors: Michael C. Ehrhardt, Eugene F. Brigham

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Question Posted: Apr 13, 2012 07:58 AM

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The current price of a stock is $22, and at the end of one year its price

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c Current price 2200 Price at end of year Exercise price 2200 H...View the full answer

Corporate Finance A Focused Approach

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