A power call option pays off (max(S T X, 0)) 2 at time T, where S T is the stock price at time T and X is the exercise price A stock price is currently $25 It is known that at the end of one year it will be either $30 or $20 The risk free rate of interest with continuous compounding is 7 5 per annum Calculate the value of a one year power call option with an exercise price of $25 a What is the delta of the power call option Blank 1(sample answer 0 75) b What is the risk neutral probability of up movement Blank 2(sample answer 0 75) c What is the value of the power option Blank 3(sample answer $15 75) A power call option pays off (max(ST X, 0))2 at time T, where ST is the stock price at time T and X is the exercise price A stock price is currently $25 It is known that at the end of one year it will be either $30 or $20 The risk free rate of interest with continuous compounding is 7 5 per annum Calculate the value of a one year power call option with an exercise price of $25 a What is the delta of the power call option (sample answer 0 75) b What is the risk neutral probability of up movement (sample answer 0 75) c What is the value of the power option (sample answer $15 75)

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A power call option pays off (max(S T -X, 0)) 2 at time T, where S T is the stock price at time T and

A power call option pays off (max(S_T-X, 0))² at time T, where S_T is the stock price at time T and X is the exercise price. A stock price is currently $25. It is known that at the end of one year it will be either $30 or $20. The risk-free rate of interest with continuous compounding is 7.5% per annum. Calculate the value of a one year power call option with an exercise price of $25. a. What is the delta of the power call option?Blank 1(sample answer: 0.75) b. What is the risk neutral probability of up movement?Blank 2(sample answer: 0.75) c. What is the value of the power option?Blank 3(sample answer: $15.75)

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A power call option pays off (max(ST-X, 0))2 at time T, where ST is the stock price at time T and X is the exercise price. A stock price is currently $25. It is known that at the end of one year it will be either $30 or $20. The risk-free rate of interest with continuous compounding is 7.5% per annum. Calculate the value of a one year power call option with an exercise price of $25. a. What is the delta of the power call option? (sample answer: 0.75) b. What is the risk neutral probability of up movement? (sample answer: 0.75) c. What is the value of the power option? (sample answer: $15.75)