The European markets has witnessed a down trend early this year, and the share price of Mercedes-Benz (MB) yesterday is 50, declined by 25 percent from last week. An investor considers a TWO-STAGE binomial model with a European put with an exercise price of 40 on MB priced at 38 today. The investors assumes that the stock price can go up by 10 percent or down by 10 percent in each of two binomial periods. The risk-free rate is 12 percent.(Use three decimal places when working. Show A of your workings. No Excel files or such) 

What is the current price of the put today using the binomial model?

Answer rating: 100% (QA)

To calculate the current price of the European put option using a twostage binomial model you can fo... View the full answer