Problem 6 40 Intro The current price of a non-dividend-paying stock is $1,797 and you expect the stock price to either go up by a factor of 1.475 or down by a factor of 0.727 each period for 2 periods over the next 1 years. Each period is 0.5 years long. A European call option on the stock expires in 1 years. Its strike price is $1,797. The risk-free rate is 7% (annual, continuously compounded). Part 1 Attempt 1/10 for 10 pts. What is the risk-neutral probability of an up movement? 3+ decima Submit Part 2 Attempt 1/10 for 10 pts. What is the option payoff in 1 years if the stock price went up twice in a row? 0+ decima Submit Part 3 Attempt 1/10 for 10 pts. What is the value of the option in 0.5 years if the stock price has gone up once? 0+ decima Submit Part 4 Attempt 1/10 for 10 pts. What is the value of the option in 0.5 years if the stock price has gone down once? 0+ decima Submit Part 5 What is the current value of the option? 0+ decima Submit Attempt 1/10 for 10 pts. Problem 7 Intro The current price of a non-dividend-paying stock is $636 and the annual standard deviation of the rate of return on the stock is 21%. A European call option on the stock expires in 0.5 years. Its strike price is $680. The risk-free rate is 5% (continuously compounded). Part 1 Attempt 1/10 for 10 pts. What should be the price (premium) of the call option? 1+ decima Submit