Question
Consider a binomial world in which the current stock price of 80 can either go up by 10 percent or down by 8 percent. The
Consider a binomial world in which the current stock price of 80 can either go up by 10 percent or down by 8 percent. The risk-free rate is 2.8 percent. Assume a one-period world. An exercise price is 80.
What is the theoretical value of the call?
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Financial Markets and Institutions
Authors: Jeff Madura
12th edition
9781337515535, 1337099740, 1337515531, 978-1337099745
