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Alphabet, Inc. (Ticker:GOOG)Is currently trading at $1,045 per share and pays no dividends. The volatility of its stock return is 25%. The risk- free rate
Alphabet, Inc. (Ticker:GOOG)Is currently trading at $1,045 per share and pays no dividends. The volatility of its stock return is 25%. The risk- free rate is 2.50 %, the European call option strike price is $1,020, and there is 1 binomial period.Assume you are trying to value a 1-year option.
1. Find the value of u and d .
2. Draw the binomial tree and find the intrinsic values of the last column.
3.Find the risk -neutral probability, p*.
4. What is the value of the $1,020-strike European call option?
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