A stock's current price is $50. Suppose the two possibilities for its price in a year are $60 and $44. The risk-free interest rate is 10% per year. Consider a call option of this stock with strike price $55 and expiration date in a year. According to the binomial pricing methodology, the current price of the call should be $ () Round your calculations to the nearest $0.01.

A stock's current price is $50. Suppose the two possibilities for its price in a year are $60 and $44. The risk-free interest rate is 10% per year. Consider a call option of this stock with strike price $55 and expiration date in a year. According to the binomial pricing methodology, the current price of the call should be $ () Round your calculations to the nearest $0.01.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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