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A stock that is currently worth $110 with be worth either $120 or $100 next period. A 1-period zero coupon bond with a face amount
A stock that is currently worth $110 with be worth either $120 or $100 next period. A 1-period zero coupon bond with a face amount of $100 sells for $95. a) Draw a tree diagram for a 1-period at-the-money call option on the stock. b) Draw a tree diagram for a portfolio consisting of longing1 share of stock and shorting 1 zero coupon bond. c) Comparing the trees for parts (a) and (b), what is the price of the call option. What assumption are you making
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