The stock’s price S is $100. After three months, it either goes up and gets multiplied by the factor U = 1.13847256, or it goes down and gets multiplied by the factor D = 0.88664332. — Options mature after T = 0.5 years and have a strike price of K = $105. — The continuously compounded risk-free interest rate r is 5 percent per year. — Today’s European call price is c and the put price is p. Call prices after one period are denoted by cU in the up node and cD in the down node. Call prices after two periods are denoted by cUD in the “up, and then down node” and so on. Put prices are similarly defined. The stock price tree (in dollars) is given by:

Group of answer choices

S = 100; US = 113.8473 and DS = 88.6643; UUS = 129.6129, UDS = 100.9419, and DDS = 78.6136

S = 100; US = 113.8473 and DS = 88.6643; UUS = 135.3238, UDS = 10, and DDS = 74.2672

S = 100; US = 113.8473 and DS = 88.6643; UUS = 123.9862, UDS = 101.5113, and DDS = 83.1104

S = 100; US = 113.8473 and DS = 88.6643; UUS = 130.2617, UDS = 101.4479, and DDS = 79.0077

Answer rating: 100% (QA)

Solution 0848 ENG 02052020 18 AR498 fx AL AN AO AQ AR AS T AU AV AW 481 482 K 105 u 113847256 483 S ... View the full answer