Question
(1) What is the value of u? (Leave 2 d.p. for the answer) (2) What is the value of S ud ? (Leave 2 d.p.
(1) What is the value of u? (Leave 2 d.p. for the answer)
(2) What is the value of Sud? (Leave 2 d.p. for the answer)
(3) What is the value of Cuu? (Leave 2 d.p. for the answer)
(4) What is the value of Cud? (Leave 2 d.p. for the answer)
(5) What is the value of Cdd?
(6) What is the value of Cu? (Leave 2 d.p. for the answer)
(7) What is the value of Cd? (Leave 2 d.p. for the answer)
(8) What is the call option premium C? (Leave 2 d.p. for the answer)
(9) If the option is American style, in which node (u or d) do you want to exercise before expiration?
Select one:
a. Node u
b. Node d
(10) What is the American call option premium? (Leave 2 d.p. for the answer)
With the following information: Spot price 1100 Strike price 185 Continuously compounded Risk-free rate 2% Continuous Dividend yield 3% Time to maturity 11 year Annualized volatility 10.3 Construct a 2-step binomial tree for a European call option. Suu Cuu Su Cu Au Bu S C Sud = Sdu Cud = Cdu B Sa Cd Ad Ba Sad CadStep by Step Solution
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