Question
A stock is currently trading at $75. The risk free interest rate is 5%. In nine months, analysts believe that share price will either be
A stock is currently trading at $75. The risk free interest rate is 5%. In nine months, analysts believe that share price will either be $80 or $70.
a) Using both the Delta method and the Risk Neutral method, find the value of a nine month call option with strike price $74.
b) What would the value of a Put with the same strike price and maturity be? (Hint: you do not need to use Binomial Valuation methods to solve this question)
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Investment Analysis And Portfolio Management
Authors: Frank K. Reilly, Keith C. Brown
7th Edition
0324171730, 978-0324171730
