eBay stock is currently at $54. It is expected to rise 9% or fall 7% in each
Fantastic news! We've Found the answer you've been seeking!
Question:
eBay stock is currently at $54. It is expected to rise 9% or fall 7% in each of two 3-month periods. Suppose it rises 9% during both periods. The risk-free interest rate is 0.5% per 3 month period. What is the payoff value of a call option contract with an exercise price of $54 at the end of the 6-month period?
According to Connect, the answer is $4.16 but I don't understand why.
Related Book For
Financial reporting, financial statement analysis and valuation a strategic perspective
ISBN: 978-0324789416
7th Edition
Authors: James M Wahlen, Stephen P Baginskl, Mark T Bradshaw
Posted Date: