According to the efficient market hypothesis, financial markets fluctuate daily because they _________

Select one:

a. offer tremendous risk-free arbitrage opportunities.

b. are unreliable.

c. slowly react to new information.

d. are inefficient.

e. are continually reacting to new information.

Most analysts agree that if the operations of a firm are not similar to the operations of the industry the firm should use _______.

Select one:

a. the beta appropriate to the risk of the project

b. its overall beta

c. the beta of the industry leader.

d. the T-bills beta

Black-Holes Exchange Inc. reports the following information for call or put options on shares of common stock of Galaxy Corp.

Current market price of the stock is $60.

Exercise price (call or put) is $60.

Expiration date of the option (call or put) is three months from now.

T-bills rate is 5.7%.

The estimated annual standard deviation of the stock is 30%.

Based on this information the estimated current price of the call is _______ .

Select one:

a. $0

b. $2.00

c. $3.15

d. $4.00