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QUESTION 49 A stock is currently trading at 7.50. The risk free rate for one period is 10%. Assume that after one time period it

QUESTION 49

A stock is currently trading at 7.50. The risk free rate for one period is 10%. Assume that after one time period it either trades at 9.00 or 6.00. The value of a call option with strike price 7.00 is closest to:

A. 1.00

B. 1.36

C. 1.50

D. 1.66

QUESTION 50

Which of the following is not an assumption of the Black-Scholes model?

A. Security trading is continuous

B. All securities are perfectly divisible

C. Short selling is not permitted

D. There are no transaction costs

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