Suppose that a stock has current price of $15. It is expected that in 4 months, the value of the stock would either be $20 or $13. A 4 months call option with strike price of $17 on the stock is being initiated today. If the interest rates are 5% per annum for 4 months continuously compounded then, what is the price of the call option today? b. What is the price of the option if it's a 4 months put option with strike price $18?
Suppose that a stock has current price of $15. It is expected that in 4 months, the value of the stock would either be $20 or $13. A 4 months call option with strike price of $17 on the stock is being initiated today. If the interest rates are 5% per annum for 4 months continuously compounded then, what is the price of the call option today? b. What is the price of the option if it's a 4 months put option with strike price $18?
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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a. Suppose that a stock has current price of $15. It is expected that in 4 months, the value of the stock would either be $20 or $13. A 4 months call option with strike price of $17 on the stock is being initiated today. If the interest rates are 5% per annum for 4 months continuously compounded then, what is the price of the call option today? b. What is the price of the option if it's a 4 months put option with strike price $18?
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