Question: uiz 9 -EBF 473 - Spring 2015 - Key SkyCorp, the solar power satellite manufacturer, is currently selling for $100. If u=1.08, d=1/u, and r=1%,

uiz 9 -EBF 473 - Spring 2015 - Key SkyCorp, the solar power satellite manufacturer, is currently selling for $100. If u=1.08, d=1/u, and r=1%, how much is a option to be exercised at 105 worth after ONE period if the payoff is sqrt(abs(S-K)), i.e. the square root of the absolute value of S-K? Use the binary method and the payoff formula given above. Show your work! ans = 100.0000 108.0000 0 92.5926 ans = 1.7321 3.5224 delta = 0.1162 valueAtEnd = 14.2818 valueAtStart = 14.1404 t= 2.5203 1.7321 0 3.5224 Final answer = 2.5203

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