nsider a binomial pricing model with the following assumptions: - the underlying stock is currently trading at $200 per share - risk-free rate is 1.5% - probability of price increase is 50% - price change for each period is 50% - call option exercise price is $250 per share Calculate option value in the up positio

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
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Consider a binomial pricing model with the following assumptions:

- the underlying stock is currently trading at $200 per share

- risk-free rate is 1.5%

- probability of price increase is 50%

- price change for each period is 50%

- call option exercise price is $250 per share

Calculate option value in the up position.

   

$50

   

$0

   

$100

   

-$50



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