FIN 534 RANK Imagine Your Future /fin534rank.com FIN 534 RANK Imagine Your Future /fin534rank.com - Page 11

Which of the following statements is CORRECT? • Question 29 Which of the following statements is CORRECT? • Question 30 The capital intensity ratio is generally defined as follows: FIN 534 Final Exam Part 1 Set 2 FIN 534 Final Exam Part 1 • The current price of a stock is $22, and at the end of one year its price will be either $27 or $17. The annual risk-free rate is 6.0%, based on daily compounding. A 1-year call option on the stock, with an exercise price of $22, is available. Based on the binomial model, what is the option's value? (Hint: Use daily compounding.)