1. Consider a two-period binomial model, where each period is 6 months. Assume the stock price is $75.00, = 0.35, and r = 0.05. An American call option with a strike price of $80 would be exercised early at what dividend yield?
a. 5.0%
b. 7.0%
c. 9.0%
d. Never exercise early
2. Anakin puts $700 per year (starting today) into a retirement account. The account pays 4% effective annual interest. How much will Anakin have in this account immediately after the deposit 4 years from today is made?
a. $2,700
b. $3,800
c. $3,000
d. $3,150
e. $4,450
3. Consider a one-period binomial model of 12 months. Assume the stock price is $54.00, = 0.25, r = 0.04 and the exercise price of a call option is $55. What is the forecasted price of the stock given a downward movement during the year?
a. $ 45.28
b. $43.77
c. $48.98
d. $51.84