Question: Binomial Model Variables U 1.15 D 0.90 Index price PKR720 Strike price PKR750 Hedge ratio 0.5697 Interest rate 3% Calculate the price investor paid two

Binomial Model Variables

U

1.15

D

0.90

Index price

PKR720

Strike price

PKR750

Hedge ratio

0.5697

Interest rate

3%

Calculate the price investor paid two years ago for call option with strike price of PKR750 using the binomial valuation method and the data above.

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