Today, the continuous compound interest rate is 0.1% and one share of Amazon is $2367.92.

Strike price= $2369.10

Call= $182.53

volatility 27%

d1=0.1065

d2=-0.0844

4. Use the binomial model with 4 steps to find the American style option price in part 2 above.

Continuous compound interest rate=0.1% ir Share price of amazon = $2367,92=5. future price of amazon Le months from now = $236 9.10 I will buy the European call option 2. volatility of amazon = 27% Strike price= $2369. 20 (x) Co = SN (d)-xert N (d) d = ln (s) + (x + 2) E ort In/2367,92 + --- 40.000 = (0,173) as 2364.10 027705 di = 0.1065 da = d.-rit = 0,1065-0.27805 da =-0.0844 IN(d,) using excel = 0.5424 N(da) = 0,4663 0.06+46 H 10 Co = 2367.92 x 0.5424 - 2364.70xe x 0,4663 Co = $182.53 3. Put - Call Parity .p+ + S + C + + PV of x => P7 + 2367.92 - 182.53 + 336.400 os => pt +2367.92= 182.53 + 23.62,91 pt = $177.52 e 2ootos 2724.15 2004.05 25 Potto 360.06+ x= P + Co. 1177.52 +182,53 = $360,35 K= 2364, 10 K-x = 256410- 360or $2004.05 k+x=82724,15 Continuous compound interest rate=0.1% ir Share price of amazon = $2367,92=5. future price of amazon Le months from now = $236 9.10 I will buy the European call option 2. volatility of amazon = 27% Strike price= $2369. 20 (x) Co = SN (d)-xert N (d) d = ln (s) + (x + 2) E ort In/2367,92 + --- 40.000 = (0,173) as 2364.10 027705 di = 0.1065 da = d.-rit = 0,1065-0.27805 da =-0.0844 IN(d,) using excel = 0.5424 N(da) = 0,4663 0.06+46 H 10 Co = 2367.92 x 0.5424 - 2364.70xe x 0,4663 Co = $182.53 3. Put - Call Parity .p+ + S + C + + PV of x => P7 + 2367.92 - 182.53 + 336.400 os => pt +2367.92= 182.53 + 23.62,91 pt = $177.52 e 2ootos 2724.15 2004.05 25 Potto 360.06+ x= P + Co. 1177.52 +182,53 = $360,35 K= 2364, 10 K-x = 256410- 360or $2004.05 k+x=82724,15