All reliable analysts agree that a share of ABC Corporation, selling today for ($50,) will be priced

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All reliable analysts agree that a share of ABC Corporation, selling today for \($50,\) will be priced at either \($65\) or \($45\) one year from now. They further agree that the probabilities of these events are 0.6 and 0.4, respectively. The market risk-free rate is 6 percent. What is the value of a call option on ABC whose exercise price is \($50\) and that matures in one year?

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Financial Modeling

ISBN: 9780262026284

3rd Edition

Authors: Simon Benninga

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