16 Two-state Option Pricing Model The share price of ABC plc will be either 2 or 1.5...

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16 Two-state Option Pricing Model The share price of ABC plc will be either £2 or £1.5 at the end of the year. Call options are available with one year to expiration. UK government bond yields are currently at 3 per cent.

(a) Suppose the current share price of ABC plc is £1.74. What is the value of the call option if the exercise price is £1.75 per share?

(b) Suppose the exercise price is £1.9 in part (a). What is the value of the call option now?

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Corporate Finance

ISBN: 9781526848093

4th Edition

Authors: David Hillier

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Question Posted: Jul 19, 2024 05:04 PM

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16 Two-state Option Pricing Model The share price of ABC plc will be either 2 or 1.5...

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Corporate Finance

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