73. Using a 1-period binomial model based on the forward price (a la McDonald),determine the price of an option expiring in 3 months to enter
73. Using a 1-period binomial model based on the forward price (a la McDonald),determine the price of an option expiring in 3 months to enter into a futurescontract on the Dow at $8000 if the current prepaid forward on the index hasvalue $7500, the continuous risk-free rate of interest is 8%, and the annual
volatility of the index is 35%.
(A) $320 (B) $420 (C) $520 (D) $620 (E) $720
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Authors: E. Thomas Garman, Raymond Forgue
8th Edition
0618471421, 9780618471423
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