It has been determined that 0.5 shares of stock should be purchased with borrowed funds to replicate the payoff to one call option.What is the option's strike price if the stock could range in value from $110 to $10 at the expiration of the option?

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To replicate the payoff to one call option, we need to purchase 0.5 shares of stock with borrowed funds. This means that the option's strike price should be half of the current stock price. Since the stock price can range from $110 to $10, the average stock price is ($110+$10)/2 = $60. Therefore, the option's strike price should be half of the average stock price, which is $30. However, options are usually traded in multiples of $5, so we need to round up to the nearest multiple of $5, which gives us a strike price of $35. Therefore, the closest option strike price to $35 is $60, which is option C.

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