Question
Prices of a stock are modeled using a two-period binomial tree, with each period being six months. The continuously compounded risk free interest rate is
Prices of a stock are modeled using a two-period binomial tree, with each period being six months.
The continuously compounded risk free interest rate is 7 %
The stock pays 2 % continuous dividend.
The current stock price is 65
The volatility of the stock is 40 %.
Consider an American put option on the stock expiring in a year with a strike price of $65.
What is the premium of the option?
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ISE Foundations Of Financial Management
Authors: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
18th International Edition
1265074658, 9781265074654
