Let S = $40, K = $40, r = 8% (continuously compounded), = 30%, =
Question:
a. Construct the binomial tree for the stock. What are u and d?
b. Show that the call price is $4.110.
c. Compute the prices of American and European puts.
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a We can calculate u and d as follows 11853 08781 b We need to calculate the values at the relevant ...View the full answer
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