Question
Questions 16 to 25 are based on the following information: IBM stock price follows the following two-step binomial tree. Assume interest rate is zero and
Questions 16 to 25 are based on the following information:
IBM stock price follows the following two-step binomial tree. Assume interest rate is zero and the stock does not pay dividend. All options are European options.
Question 16 (1 point)
Saved
What is the risk neutral probability for the stock to go up at each node (they are the same at all three nodes)?
Question 16 options:
| 0.33 |
| 0.5 |
| 0.67 |
| 0.7 |
Question 17 (1 point)
What's the value for a put option at node B with a strike price of $117?
Question 17 options:
| $0 |
| $3 |
| $6 |
| $9 |
Question 18 (1 point)
What's the value for a put option at node C with a strike price of $117?
Question 18 options:
| $24 |
| $27 |
| $30 |
| $15 |
Question 19 (1 point)
What's the value for a put option at node A with a strike price of $117?
Question 19 options:
| $17 |
| $18 |
| $19 |
| $20 |
Question 20 (1 point)
Saved
What's the value for a call option at node A with a strike price of $117?
Question 20 options:
| $1 |
| $2 |
| $3 |
| $4 |
Question 21 (1 point)
What's the replicating portfolio at node A for a put option with a strike price of $117?
Question 21 options:
| Short 0.7 share of IBM; Long $90 T-Bills; |
| Short 0.9 share of IBM; Long $108 T-Bills; |
| Buy 0.7 share of IBM; Short $90 T-Bills; |
| Buy 0.9 share of IBM; Short $108 T-Bills; |
Question 22 (1 point)
What's the replicating portfolio at node A for a call option with a strike price of $117?
Question 22 options:
| Short 0.1 share of IBM; Long $9 T-Bills; |
| Short 0.3 share of IBM; Long $27 T-Bills; |
| Buy 0.1 share of IBM; Short $9 T-Bills; |
| Buy 0.3 share of IBM; Short $27 T-Bills; |
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