# Question: Repeat Problem 11 1 only assume that r 0 08 and

Repeat Problem 11.1, only assume that r = 0.08 and δ = 0.Will early exercise ever occur? Why?

In Problem 11.1

Consider a one-period binomial model with h = 1, where S = $100, r = 0, σ = 30%, and δ = 0.08. Compute American call option prices for K = $70, $80, $90, and $100.

In Problem 11.1

Consider a one-period binomial model with h = 1, where S = $100, r = 0, σ = 30%, and δ = 0.08. Compute American call option prices for K = $70, $80, $90, and $100.

## Relevant Questions

Consider a one-period binomial model with h = 1, where S = $100, r = 0.08, σ = 30%, and δ = 0. Compute American put option prices for K = $100, $110,$120, and $130. a. At which strike(s) does early exercise occur? b. Use ...Repeat the previous problem, except that for each strike price, compute the expected return on the option for times to expiration of 3 months, 6 months, 1 year, and 2 years. What effect does time to maturity have on the ...Consider a bull spread where you buy a 40-strike put and sell a 45-strike put. Suppose σ = 0.30, r = 0.08, δ = 0, and T = 0.5. a. Suppose S = $40. What are delta, gamma, vega, theta, and rho? b. Suppose S = $45. What are ...Let S = $100, K = $120, σ = 30%, r = 0.08, and δ = 0. a. Compute the Black-Scholes call price for 1 year to maturity and for a variety of very long times to maturity. What happens to the option price as T →∞? b. Set δ ...Repeat Problem 13.9 for a 91-day 40-strike put.Post your question