Question
Buffelhead's stock price is $235 and could halve or double in each six-month period (equivalent to a standard deviation of 95%). A one year call
Buffelhead's stock price is $235 and could halve or double in each six-month period (equivalent to a standard deviation of 95%). A one year call option has an exercise price of $180, 18% is interest per year. |
The option is American and that at the end of the first six months the company pays a dividend of $24. (Thus the price at the end of the year is either double or half the ex-dividend price in month 6.) |
a. | Calculate the value of the Buffelhead call option. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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