Question
A stock with a current price of $62 has a put option available with a strike price of $59. The stock will move up by
A stock with a current price of $62 has a put option available with a strike price of $59. The stock will move up by a factor of 1.23 or down by a factor of .92 over the next period and the risk-free rate is 3 percent.
a. What is the up price
b. What is the down price
c. What is the value of the call option in up price
d. What is the value of the call option in down price
e. What is the risk-neutral probabilities
f. What is the price of the call option today
g. What is the price of the put option today
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Financial ACCT2
Authors: Norman H. Godwin, C. Wayne Alderman
2nd edition
9781285632544, 1111530769, 1285632540, 978-1111530761
