Question: A partial two-stage binomial tree is shown below for an American call option with a strike price of $155, spot price of $154, and volatility

A partial two-stage binomial tree is shown below for an American

A partial two-stage binomial tree is shown below for an American call option with a strike price of $155, spot price of $154, and volatility () of 20%. The risk-free rate is 1% per annum compounded continuously.

If the value of fu in the tree above turns out to be 10 , what would be the value (f) of this option today?

Answer Choices

f 5

5

15

30

f > 45

T=0 T= 3mo T= 6mo Suu=188.10 fuu=33.10 Sy=170.20 f,=? (1-P) - p=0.4439 So=154 f Sud=154.00 fud=0 (1-2)=0.5561 Sg-139.34 fq=0 (1-0) Sca=126.08 fd=0

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