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Question

Rockford stock is trading at $20/share and can either increase to

$26 or decrease to $18 over the course of one year. In a one-period binomial option model, given an interest rate of 5%, what is the price of an at-the money call on Rockford stock expiring in one year? (Use annual compounding.)
Multiple Choice

-$2.50
-$2.88
-$3.00
-$2.14

Step-by-step answer

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Subject: Business, Finance

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