Exhibit 14.2 (THE EXHIBIT IS THE INFORMATION) USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM

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 14.2. Estimate n, which is the number of call options that must be written.

a. -1.4286

b. -1.1111

c. -2.5714

d. -2.9286

e. -2.8571