USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The information provided is relevant in the context of a one period (one year) binomial option pricing model. A stock currently trades at $50 per share, and a call option on the stock has an exercise price of $45. The stock is equally likely to rise by 25 percent or fall by 25 percent. The one-year, risk-free rate is 2 percent.
-Refer to Exhibit 16.5. Estimate n, which is the number of call options that must be written.
A) -1.4286
B) -2.9286
C) -2.8571
D) -2.5714
E) -1.1111

Question

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The Answer of USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The information provided is relevant in the context of a one period (one year) binomial option pricing model. A stock currently trades at $50 per share, and a call option on the stock has an exercise price of $45. The stock is equally likely to rise by 25 percent or fall by 25 percent. The one-year, risk-free rate is 2 percent.
-Refer to Exhibit 16.5. Estimate n, which is the number of call options that must be written.
A) -1.4286
B) -2.9286
C) -2.8571
D) -2.5714
E) -1.1111