A stock with a current price of $300, can go either up by 25%, or down...
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A stock with a current price of $300, can go either up by 25%, or down by 20%. You have the opportunity to buy an American call option on this stock for $65, which matures at the end of two periods, with an exercise price of 275. Please draw the trees of the stock and option values What is the price of the call option today if the risk free rate is 8%. What is your decision for this investment opportunity? Explain your answer a- b- C- A stock with a current price of $300, can go either up by 25%, or down by 20%. You have the opportunity to buy an American call option on this stock for $65, which matures at the end of two periods, with an exercise price of 275. Please draw the trees of the stock and option values What is the price of the call option today if the risk free rate is 8%. What is your decision for this investment opportunity? Explain your answer a- b- C-
Expert Answer:
Answer rating: 100% (QA)
a Here is the tree diagram representing the stock and option values S 300 S 375 S 240 S 468 S 300 S 288 S 192 C 65 C C C C C C b To calculate the pric... View the full answer
Related Book For
Corporate Finance A Focused Approach
ISBN: 978-1305637108
6th edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
Posted Date:
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