The futures price of a commodity is $88. Use a three-step tree to value (a) a nine-month American call option with strike price $91 and (b) a nine-month American put option with strike price $91. The volatility is 28% and the risk-free rate (all maturities) is 3% with continuous compounding. 8.044 and 10.988 7.218 and 10.169 7.734 and 10.679 8.560 and 11.506

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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The futures price of a commodity is $88. Use
a three-step tree to value (a) a nine-month
American call option with strike price $91 and
(b) a nine-month American put option with
strike price $91. The volatility is 28% and the
risk-free rate (all maturities) is 3% with
continuous compounding.
8.044 and 10.988
7.218 and 10.169
7.734 and 10.679
8.560 and 11.506
Transcribed Image Text:The futures price of a commodity is $88. Use a three-step tree to value (a) a nine-month American call option with strike price $91 and (b) a nine-month American put option with strike price $91. The volatility is 28% and the risk-free rate (all maturities) is 3% with continuous compounding. 8.044 and 10.988 7.218 and 10.169 7.734 and 10.679 8.560 and 11.506
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