Question
A firm has stock outstanding with a current price of $25 per share. The price in one period is expected to be either $30 or
A firm has stock outstanding with a current price of $25 per share. The price in one period is expected to be either $30 or $35. A call option on ONE share is available with an exercise price of $20. If the risk-free rate of interest is 5%, what would you pay for the call option?
| a. $0.00 | ||
| b. $5.00 | ||
| c. $5.95 | ||
| d. $6.90 | ||
| e. $7.25 |
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Public Finance
Authors: Harvey S Rosen
7th Edition
0072876484, 978-0072876482
