Future prices of a stock are modeled with a 12-period binomial tree, each period being one...
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Future prices of a stock are modeled with a 12-period binomial tree, each period being one month. You are given: (i) The tree is constructed based on forward prices. (ii) The stock's initial price is 50. (iii) The continuously compounded risk-free interest rate is 4%. (iv) The stock pays no dividends. (v) σ=0.1 An American call option on the stock expiring in one year has strike price 70. Calculate the price of the call option. Future prices of a stock are modeled with a 12-period binomial tree, each period being one month. You are given: (i) The tree is constructed based on forward prices. (ii) The stock's initial price is 50. (iii) The continuously compounded risk-free interest rate is 4%. (iv) The stock pays no dividends. (v) σ=0.1 An American call option on the stock expiring in one year has strike price 70. Calculate the price of the call option.
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The price of the call option is 060 To calculate this we start by taking the difference between curr... View the full answer
Related Book For
Management and Cost Accounting
ISBN: 978-1405888202
4th edition
Authors: Alnoor Bhimani, Charles T. Horngren, Srikant M. Datar, George Foster
Posted Date:
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