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Corporate Finance · End Term · 22 Dec 2024 · September 2024 term · Set QDB3

Question 27: A stock is trading at Rs 100 today. In 3 months, the sto…

Question 27

+3 marksOne correct option

A stock is trading at Rs 100 today. In 3 months, the stock price can either increase to Rs 120 or decrease to Rs 90. The three-month risk-free rate is 5%. A three-month call option has an exercise price of Rs 105. What is the risk-neutral probability that stock price increases?

  1. A

    40.0%

  2. B

    50.0%

  3. C

    53.3%

  4. D

    60.0%

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Correct answer

  • B

    50.0%

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Question 27 of 35 in the IIT Madras BS Corporate Finance (Corporate Finance) End Term paper sat on 22 Dec 2024, in the September 2024 term (IIT M DEGREE AN EXAM QDB3 22 Dec 2024). It carries 3 marks.

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