The current price of KD Industries stock is $20. In the next year the stock price will either go up by 20% or go down by 20%. KD pays no dividends. The one year risk-free rate is 5% and will remain constant. Using the binomial pricing model, the calculated price of a one-year call option on KD stock with a strike price of $20 is closest to:
The current price of KD Industries stock is $20. In the next year the stock price will either go up by 20% or go down by 20%. KD pays no dividends. The one year risk-free rate is 5% and will remain constant. Using the binomial pricing model, the calculated price of a one-year call option on KD stock with a strike price of $20 is closest to:
Chapter20: Financing With Derivatives
Section20.A: The Black-scholes Option Pricing Model
Problem 1P
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The current price of KD Industries stock is $20. In the next year the stock price
will either go up by 20% or go down by 20%. KD pays no dividends. The one
year risk-free rate is 5% and will remain constant. Using the binomial pricing
model, the calculated price of a one-year call option on KD stock with a strike
price of $20 is closest to:
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