# Question: DPG a non dividend paying stock is currently trading for 150 a

DPG, a non-dividend-paying stock, is currently trading for $150 a share. There is a 30-percent chance that the stock will trade for $125 in one year, and a 70-percent chance that the price will increase to $175. The risk-free rate is 5 percent per year. There is a one-year call with a strike price of $165.

a. What is the price of the call?

b. b. What is the delta of the call? Define and calculate.

a. What is the price of the call?

b. b. What is the delta of the call? Define and calculate.

**View Solution:**## Answer to relevant Questions

Xiang Zhu, a client of FinCorp Inc., has phoned you with a question. She has been reading a finance textbook and cannot understand how to use the binomial option pricing model to value a call option. The underlying stock is ...1. What will probably happen if a firm does not invest effectively?a. The firm could still maintain its competitive advantage.b. The cost of capital of the firm will be unchanged.c. The long-term survival of the firm will be ...BigCo Manufacturing Company is also debating whether to invest in Project H (a three-year project) or Project D. Project H has cash flow of –$3,000, $1,500, $1,200, and $750 in years 0, 1, 2, and 3. Determine which project ...Daria is evaluating two investments—investment 1 will produce cash flows for the next 5 years and has an NPV of $1,000. Investment 2 will produce cash flows for the next 15 years and has an NPV of $700. Based on this ...Westlake Corp. has a capital structure that has 60 percent debt at a cost of 12 percent and 40 percent equity. Westlake’s stock has a beta of 1.2, market risk premium of 8 percent, and a risk-free rate of 5 percent. The ...Post your question