Question
Given the following parameters use risk-neutral valuation to value a call option. Current stock price: $73.00 Stock will increase or decrease next year by: 15
Given the following parameters use risk-neutral valuation to value a call option.
| Current stock price: | $73.00 |
| Stock will increase or decrease next year by: | 15 pct. |
| Call Option strike price: | $70.00 |
| Time to expiration: | 1 year |
| Risk free rate: | 8 pct. |
A)Value of call: $9.90
B)Value of call: $8.19
C)Value of call: $12.92
Please show your work.
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Financial Institutions Management A Risk Management Approach
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
8th edition
978-0078034800, 78034809, 978-0071051590
