1. The current price of a stock is $50. In 1 year, the price will be either...
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Question:
1. The current price of a stock is $50. In 1 year, the price will be either $65 or $35. The annual risk-free rate is 10%. Find the price of a call option on the stock that has an exercise price of $55 and that expires in 1 year. (Hint: Use daily compounding.)
2. The exercise price on one of Chrisardan Company's call options is $20, its exercise value is $27, and its time value is $8. What are the option's market value and the price of the stock?
Related Book For
Financial management theory and practice
ISBN: 978-0324422696
12th Edition
Authors: Eugene F. Brigham and Michael C. Ehrhardt
Posted Date: