Consider a one period binomial model The initial stock price is $30 Over the next 3 months, the stock price could either go up to $36 (u 1 2) or go down to $24 (d 0 8) The continuously compounded interest rate is 6 per annum Use this information to answer questions 14 to 22 Consider a call option whose strike price is $32 Consider a two period binomial model using this information The put option is will expire after 3 3 6 months What is the price of the European put option with a strike price of $28 $3 47 $2 96 $2 37 $1 94 $1 82 If the above put option is an American put, what is its price $3 47 $2 96 $2 37 $1 94 $1 82

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Question: Consider a one period binomial model. The initial stock price is $30. Over the next 3 months, the stock price could either go up to

Consider a one period binomial model. The initial stock price is $30. Over the next 3 months, the stock price could either go up to $36 (u = 1.2) or go down to $24 (d = 0.8). The continuously compounded interest rate is 6% per annum. Use this information to answer questions 14 to 22. Consider a call option whose strike price is $32.

Consider a two period binomial model using this information. The put option is will expire after 3 + 3 = 6 months. What is the price of the European put option with a strike price of $28?

$3.47
$2.96
$2.37
$1.94
$1.82

If the above put option is an American put, what is its price?

$3.47
$2.96
$2.37
$1.94
$1.82

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