Question 6

Let S = $100, K = $95, = 30%, r =8%, T = 1, and = 0. For simplicity, let u = 1.3, d = 0.8 and n = 2 (that is, 2 periods). When constructing the binomial tree, what is the stock price at maturity (at the end of period 2) if the stock price goes up and then down (or down and then up)?

 

Question 7

  

Let S = $100, K = $95, = 30%, r =8%, T = 1, and = 0. For simplicity, let u = 1.3, d = 0.8 and n = 2 (that is, 2 periods). When constructing the binomial tree, what is the European call option value at maturity (at the end of period 2) if the stock price goes down and then down?

 

Question 8

Let S = $100, K = $95,  = 30%, r =8%, T = 1, and  = 0. For simplicity, let u = 1.3, d = 0.8 and n = 2 (that is, 2 periods). When constructing the binomial tree for the European call option, what is  (Stock Share Purchased in the replicating portfolio) at the down node at the end of Period 1 (after the stock price goes down once)?

Question 9

Let S = $100, K = $95, = 30%, r =8%, T = 1, and = 0. For simplicity, let u = 1.3, d = 0.8 and n = 2 (that is, 2 periods). When constructing the binomial tree for the European call option, what is B (Dollar Amount Borrowed in the replicating portfolio) at the down node at the end of Period 1 (after the stock price goes down once)?

Question 10

   

Let S = $100, K = $95, = 30%, r =8%, T = 1, and = 0. For simplicity, let u = 1.3, d = 0.8 and n = 2 (that is, 2 periods). When constructing the binomial tree, what is the European call option value at the down node at the end of Period 1 (after the stock price goes down once)?