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Assume a stock is currently priced at $50.00 and follows a binomial process with u=1.15, d=0.87. The risk free rate is 5% (per period). (20
Assume a stock is currently priced at $50.00 and follows a binomial process with u=1.15, d=0.87. The risk free rate is 5% (per period). (20 pts)
- What is the risk neutral probability (p) that the stock will move up in any period?
- Use the BOPM to price a European call with a strike price of $55.00 and 2 periods to maturity (i.e. find C(50,2,55)).
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Principles Of Managerial Finance
Authors: Lawrence J Gitman, Chad J Zutter
7th Edition
0133546403, 9780133546408
