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Intro The current price of a non-dividend-paying stock is $37.32 and you expect the stock price to either go up by a factor of 1.492
Intro The current price of a non-dividend-paying stock is $37.32 and you expect the stock price to either go up by a factor of 1.492 or down by a factor of 0.67 over the next 1 years. A European put option on the stock has a strike price of $37 and expires in 1 years. The risk-free rate is 8% (annual, continuously compounded). Attempt 1/3 for 10 pts. Part 1 What is the option payoff if the stock price goes down? 1+ decimals Submit Attempt 1/3 for 10 pts. Part 2 What is the risk-neutral probability of an up movement? 2+ decimals Submit Attempt 1/3 for 10 pts. Part 3 What is the value of the option? 1+ decimals Submit
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