Question: Question 5 (1 point) Consider a two-period (three dates) at the money call option written on a $5 stock that can go up or down

Question 5 (1 point) Consider a two-period (three dates) at the money call option written on a $5 stock that can go up or down 15 percent each period when the risk-free rate is 5 percent. That is, At t=0, stock value is SO=$5. At t=1, stock value is either Su=$5.75 (up) or Sd=$4.25 (down). At t=2, stock value is Suu=$6.6125 (up-up), Sud=$4.8875 (up-down), Sud=$4.8875 (down-up), Sdd=$3.6125 (down-down). What is the risk neutral probability? 0.75 0.67 0.33 0.54 Previous Page Next Page Page 5 of 11 Question 5 (1 point) Consider a two-period (three dates) at the money call option written on a $5 stock that can go up or down 15 percent each period when the risk-free rate is 5 percent. That is, At t=0, stock value is SO=$5. At t=1, stock value is either Su=$5.75 (up) or Sd=$4.25 (down). At t=2, stock value is Suu=$6.6125 (up-up), Sud=$4.8875 (up-down), Sud=$4.8875 (down-up), Sdd=$3.6125 (down-down). What is the risk neutral probability? 0.75 0.67 0.33 0.54 Previous Page Next Page Page 5 of 11

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