se Two-State Binomial Option (European) Pricing Model. Suppose you bought a stock today for $38.00. The stock price can either go up by a factor of 1.30 or down by a factor of 0.70 with equal probability in 0.50 years (or 180 days). Suppose the annual risk-free rate is 3.50% and the option exercise price is 35.00. How much should be the Call Option Value that expires in 0.50 years (or 180 days)? Enter your answer in the following format: 1.23 Hint: The answer is between 6.74 and 9.38
se Two-State Binomial Option (European) Pricing Model. Suppose you bought a stock today for $38.00. The stock price can either go up by a factor of 1.30 or down by a factor of 0.70 with equal probability in 0.50 years (or 180 days). Suppose the annual risk-free rate is 3.50% and the option exercise price is 35.00. How much should be the Call Option Value that expires in 0.50 years (or 180 days)? Enter your answer in the following format: 1.23 Hint: The answer is between 6.74 and 9.38
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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- Use Two-State Binomial Option (European) Pricing Model.
- Suppose you bought a stock today for $38.00.
- The stock price can either go up by a factor of 1.30 or down by a factor of 0.70 with equal probability in 0.50 years (or 180 days).
- Suppose the annual risk-free rate is 3.50% and the option exercise price is 35.00.
How much should be the Call Option Value that expires in 0.50 years (or 180 days)?
Enter your answer in the following format: 1.23
Hint: The answer is between 6.74 and 9.38
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