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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Transcribed Image Text:QUESTION 4
A stock price is currently $40. It is known that at the end of 1 year it will be either $48or $32. The risk free interest rate is 5% per annum with
continuous compounding.
What is the value of a portfolio at a time of 1 year with a strike price of $527 (use A0.25)
Hint: draw a tree
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