Question
Question 2: Use the following information to calculate the options price for a six-month call option on Amazon's stock, which is currently priced at $210.00
Question 2: Use the following information to calculate the options price for a six-month call option on Amazon's stock, which is currently priced at $210.00 per share (stock price). The options exercise price is $230.00. The option has a three-month time to maturity, the 3-month risk-free rate is 0.8% and the market return is expected to be 5%. You expect the following possible stock prices in three months to be $180 or $240. If the price is $180 in 3 months, it can either go down to $150 or up to $210 in 6 months (from now). If the prices is $240 in 3 months, it can either go down to $210 or up to $270 in 6 months (from now). Calculate the value of this option using the portfolio replication method, showing all of your work and rounding your final answer to the nearest penny.
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