By using risk-neutral probabilities, find the price of a six-month European call option with a strike...

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By using risk-neutral probabilities, find the price of a six-month European call option with a strike $975 on a six-month 1,000 face zero-coupon bond. Assume (1) = 5.1%, r(.5) = 5%,and r(1) can be either 6% or 4%. By using risk-neutral probabilities, find the price of a six-month European call option with a strike $975 on a six-month 1,000 face zero-coupon bond. Assume (1) = 5.1%, r(.5) = 5%,and r(1) can be either 6% or 4%.

Answer rating: 100% (QA)

To find the price of a sixmonth European call option on a zerocoupon bond we need to calculate the r... View the full answer