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using the binomial option pricing Model calculate the value of the call if S= $100, x = 80, and the stock can either be worth $120 or $60 one year from now. Assume that the risk free rate is 10%. Without having to preform the calculation if the stock prices one year from now were $90 and $70, would the value of the call be greater or less than the previous value? Explain.

using the binomial option pricing Model calculate the value of the call if S= $100, x = 80, and the stock can either be worth $120 or $60 one year from now. Assume that the risk free rate is 10%. Without having to preform the calculation if the stock prices one year from now were $90 and $70, would the value of the call be greater or less than the previous value? Explain.

Essentials Of Investments
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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using the binomial option pricing Model calculate the value of the call if S= $100, x = 80, and the stock can either be worth $120 or $60 one year from now. Assume that the risk free rate is 10%. Without having to preform the calculation if the stock prices one year from now were $90 and $70, would the value of the call be greater or less than the previous value? Explain.
Transcribed Image Text:using the binomial option pricing Model calculate the value of the call if S= $100, x = 80, and the stock can either be worth $120 or $60 one year from now. Assume that the risk free rate is 10%. Without having to preform the calculation if the stock prices one year from now were $90 and $70, would the value of the call be greater or less than the previous value? Explain.
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