Question
CJs stock is currently trading at $18 a share. CJs stock can either increase by a factor of 1.16532 (u=1.16532) or decrease by a factor
CJs stock is currently trading at $18 a share. CJs stock can either increase by a factor of 1.16532 (u=1.16532) or decrease by a factor of 1/u (d=0.85813) over a period of 12 months. There is a 12 month call option on CJ's stock with a strike price of $20.8. The 12 month risk free rate is 4.25%. Fill in the tree below to find the price of the call option today.
- f is the call price at each point on the tree.
- S is the stock price
- u and d stand for up and down respectively
- Do not use continuous compounding
- Do not round intermediate calculations
what are the risk-neutral probabilities?
p = 60.02%
1-p= 39.98%
f is the call price at each point on the tree.
S is the stock price
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| S0 = 18 |
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|
|
| f0 = ____? |
|
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| Sd = 15.45 |
| Su = 20.98 |
|
| fd = 0 |
| fu = ____? |
|
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