Question: 22. A. Data: S0 = 100; X = 110; 1 + r = 1.1. The two possibilities for ST are 150 and 80. Calculate the

22.

A. Data: S0 = 100; X = 110; 1 + r = 1.1.

The two possibilities for ST are 150 and 80. Calculate the value of a call option on the stock with an exercise price of 110. (Do not use continuous compounding to calculate the present value of X in this example, because the interest rate is quoted as an effective per period rate)

B. If one of these variables increases, the value of put option will increase or decrease. Simply put Increase or Decrease for each of the variables If this variable increases The value of put option (will increase or decrease)?

Stock price, S

Exercise price, X

Volatility Time to expiration, T

Interest rate, r

Dividend payouts

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