The closing price of Cisco shares was $45.29 on September 1, 2022. Consider the 3 period...

 

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The closing price of Cisco shares was $45.29 on September 1, 2022. Consider the 3 period Binomial Tree model for the stock S where So= $45.29, u= 1.15, d = 0.85, r = 0.03, and 8= 0.02. Find the prices, at time t = 0, of the following options with maturity at T = 1. T= (a) An arithmetic average price call option with strike K = 48. (b) A Chooser option exercised at the first node (7-1/3) with strike K= 45 (for both the call and the put) So = 45.29 S1/3= 52.08 S1/= 38.50 $2/3= 59.90 $2/3=44.27 S2/3 = 32.72 S₁ = 68.88 S₁= 50.91 S₁ = 37.63 S₁ = 27.81 The closing price of Cisco shares was $45.29 on September 1, 2022. Consider the 3 period Binomial Tree model for the stock S where So= $45.29, u= 1.15, d = 0.85, r = 0.03, and 8= 0.02. Find the prices, at time t = 0, of the following options with maturity at T = 1. T= (a) An arithmetic average price call option with strike K = 48. (b) A Chooser option exercised at the first node (7-1/3) with strike K= 45 (for both the call and the put) So = 45.29 S1/3= 52.08 S1/= 38.50 $2/3= 59.90 $2/3=44.27 S2/3 = 32.72 S₁ = 68.88 S₁= 50.91 S₁ = 37.63 S₁ = 27.81

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To solve for the prices of the options using the 3period binomial tree model we need to calculate th... View the full answer