Find the price of an American call option on a futures if the current spot price is 30, the exercise price is 25, the futures price is 33.70, the risk-free interest rate is 6 percent, the spot asset can go up by 10 percent or down by 8 percent per period and the call expires in two periods, which is also when the futures expires. Show your working. A. 9.98 B. 8.70 C. 7.73 D. 8.22
Find the price of an American call option on a futures if the current spot price is 30, the exercise price is 25, the futures price is 33.70, the risk-free interest rate is 6 percent, the spot asset can go up by 10 percent or down by 8 percent per period and the call expires in two periods, which is also when the futures expires. Show your working. A. 9.98 B. 8.70 C. 7.73 D. 8.22
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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Find the price of an American call option on a futures if the current spot price is 30, the
exercise price is 25, the futures price is 33.70, the risk-free interest rate is 6 percent, the
spot asset can go up by 10 percent or down by 8 percent per period and the call expires in
two periods, which is also when the futures expires. Show your working.
A. 9.98
B. 8.70
C. 7.73
D. 8.22
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