Assume that you have an American call option expiring next year with exercise price of $40 on a stock which currently trades at $35. You expect the stock to increase by a factor of 1.18 and decrease by a factor of 0.75. If the interest rate is 6%, the option value today is closest to:

Assume that you have an American call option expiring next year with exercise price of $40 on a stock which currently trades at $35. You expect the stock to increase by a factor of 1.18 and decrease by a factor of 0.75. If the interest rate is 6%, the option value today is closest to:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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