Q1

To build a portfolio will exactly replicate the payoff to the call option, you need to purchase _______shares

1. 0.50

2. 0.233

3. 0.333

4. 3

5. 0.633

Q2

To build a portfolio will exactly replicate the payoff to the call option, you need to

1. borrow 19.05

2. lend 18.05

3. borrow 20

4. buy 19.05 bonds

5. buy 20 bonds

6. borrow 18.5

Q 3

Call option' price is

1. 16.4

2. 20.4

3. 3.5

4. 10.9

5. 14.3

6. 12.5

7. 0

8. 15.3

Manaba in-class test 1 Current stock price S0=$100 Stock price can take only two possible values at option expiration: Go up by u=1.5 with a probability of p=0.8 Do down by d=0.6 with a probability of (1p)=0.2 X=$120 T=1 period (expiration date) Rf=5% per period What is the call option price C0