A stock price is currently trading at $50. Over each of the next 2 ree-month periods it is expected to go up by 6% or down by 5%. e risk-free interest rate is 1.2%. What is the value of a six- nth European call option with a strike price of $51?

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Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.