Question: 12 000 points value: Suppose you are attempting to value a 1-year maturity option on a stock with volatility (i.e.,annualized standard deviation) of 0.42. a.

12 000 points value: Suppose you are attempting to value a

12 000 points value: Suppose you are attempting to value a 1-year maturity option on a stock with volatility (i.e.,annualized standard deviation) of 0.42. a. 1 period of 1 year b. 4 subperiods, each 3 months. c. 12 subperiods, each 1 month. What would be the appropriate values for u and d if your binomial model is set up using: (Do not round intermediate calculations. Round your answers to 4 decimal places.) Subperiots 1/1A1.TIn -exp(oyar) d=exp( ey'ar) 114 = 0.25 1/12-0.0833 4 43 12

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