A non-dividend paying stock, currently priced at 250, is expected to go up by 30% or go
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A non-dividend paying stock, currently priced at 250, is expected to go up by 30% or go down by 20% over a period. The risk free rate for one period is 2%. Price a call option with X=280 using the formula with factorials for 3 periods. No need to build a tree. In your answer report the 3rd period call values, the cumulative probability of each final node, and the number of paths you can get to each outcome. Do the same for a put with X=$280.
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Accounting Business Reporting for Decision Making
ISBN: 9780730302414
4th edition
Authors: Jacqueline Birt, Keryn Chalmers, Albie Brooks, Suzanne Byrne, Judy Oliver
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