Question
Currently, a stock has a price of $21.71. At the end of year, its price will either be $35 or $15. The annual risk-free rate
Currently, a stock has a price of $21.71. At the end of year, its price will either be $35 or $15. The annual risk-free rate is 3.2%, based on daily compounding. What is the price of a one-year call option with an exercise price of $22?
a. $1.05
b. $4.67
c. $7.00
d. $9.44
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Financial Markets and Institutions
Authors: Frederic S. Mishkin, Stanley G. Eakins
5th edition
321280299, 321280296, 978-0321280299
