Use the table below to calculate the premium of the call. This is a 3-year option; the present value must account for T 3. Use (1+r) for discounting. 4. Use the table below to calculate the premium of the call. This is a 3-year option; the present value must account for T=3. Use (1+r) for discounting. SO r $50 6.00% u 2 0.5 3 F3 $59.55 37.3% Strike $80.00 CALL with strike of $80.00 Outcome Ups Downs Probability 1 3 0 5.20% probability 100.00% Cumulative Underlier price $400.00 Revenue Cost from Exercise? from sale purchase Payoff Yes $400.00 $80.00 $320.00 2 2 1 26.20% 94.80% $100.00 Yes $100.00 $80.00 $20.00 3 1 2 43.98% 68.59% $25.00 No $0.00 $0.00 $0.00 4 0 3 24.61% 24.61% $6.25 No $0.00 $0.00 $0.00 Expected value $47.02 $25.13 $21.89
Use the table below to calculate the premium of the call. This is a 3-year option; the present value must account for T 3. Use (1+r) for discounting. 4. Use the table below to calculate the premium of the call. This is a 3-year option; the present value must account for T=3. Use (1+r) for discounting. SO r $50 6.00% u 2 0.5 3 F3 $59.55 37.3% Strike $80.00 CALL with strike of $80.00 Outcome Ups Downs Probability 1 3 0 5.20% probability 100.00% Cumulative Underlier price $400.00 Revenue Cost from Exercise? from sale purchase Payoff Yes $400.00 $80.00 $320.00 2 2 1 26.20% 94.80% $100.00 Yes $100.00 $80.00 $20.00 3 1 2 43.98% 68.59% $25.00 No $0.00 $0.00 $0.00 4 0 3 24.61% 24.61% $6.25 No $0.00 $0.00 $0.00 Expected value $47.02 $25.13 $21.89
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
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