Question
1) The current price of a stock is $15. In 6 months, the price will be either $18 or $13. The annual risk-free rate is
1)
The current price of a stock is $15. In 6 months, the price will be either $18 or $13. The annual risk-free rate is 3%. Find the price of a call option on the stock that has a strike price of $14 and that expires in 6 months. (Hint: Use daily compounding.) Round your answer to the nearest cent. Assume a 365-day year. Do not round your intermediate calculations.
2)
The current price of a stock is $20. In 1 year, the price will be either $26 or $15. The annual risk-free rate is 3%. Find the price of a call option on the stock that has a strike price is of $24 and that expires in 1 year. (Hint: Use daily compounding.) Round your answer to the nearest cent. Assume 365-day year. Do not round your intermediate calculations.
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Financial Management Principles And Applications
Authors: Sheridan Titman, Arthur Keown, John Martin
13th Global Edition
1292222182, 978-1292222189
