Question
A stock price is currently $50. Over each of the next two six-month periods, it is expected to go up by 20% or down by
A stock price is currently $50. Over each of the next two six-month periods, it is expected to go up by 20% or down by 10%. The risk-free interest rate is 5% per annum with continuous compounding.
a. What is the value of a one-year European call option with a strike price of $55?
b. What is the value of a one-year American put option with a strike price of $55?
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Principles Of Finance With Excel
Authors: Simon Benninga
2nd Edition
0199755477, 9780199755479
