Question
A stock with a current price of $300, can go either up by 10%, or down by 10%. You have the opportunity to buy
A stock with a current price of $300, can go either up by 10%, or down by 10%. You have the opportunity to buy an American call option on this stock for $65, which matures at the end of one period, with an exercise price of 275. Please draw the trees of the stock and option a- values b- What is the price of the call option today if the risk free rate is 8%. What is your decision for this investment opportunity? Explain your answer C-
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Practical Management Science
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