Consider the following one binomial option pricing involving an American call. Assume a stock price currently at RM$110$ and call option with an exercise price of RM$110$ and a risk$-$free rate of $7\%.$ In the next period, the stock can be either increase and decrease by $15\%$ and$10\%$ respectively. Proof if the call price is mispricing?

Answer rating: 100% (QA)

Heres how we can analyze the potential mispricing of the call option 1 Data Summary Stock Price S RM110 Exercise Price X RM110 RiskFree Rate r 7 Upwar... View the full answer