The stock price of Heavy Machine (HM) changes only once a month: Either it goes up by 20% or it falls by 16.7%. Its price now is $50. The interest rate is 1% per month. What is the value of a one-month call option with an exercise price of $45? Round to 2 decimal points for each step of the calculation. A. $ 7.20 B. $ 7.13 C. $ 7.72 D. $ 7.80
The stock price of Heavy Machine (HM) changes only once a month: Either it goes up by 20% or it falls by 16.7%. Its price now is $50. The interest rate is 1% per month. What is the value of a one-month call option with an exercise price of $45? Round to 2 decimal points for each step of the calculation. A. $ 7.20 B. $ 7.13 C. $ 7.72 D. $ 7.80
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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The stock price of Heavy Machine (HM) changes only once a month: Either it goes up
by 20% or it falls by 16.7%. Its price now is $50. The interest rate is 1% per month.
What is the value of a one-month call option with an exercise price of $45?
Round to 2 decimal points for each step of the calculation.
A. $ 7.20
B. $ 7.13
C. $ 7.72
D. $ 7.80
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