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Questions 9 to 15 are based on the following information: IBM is trading at $72 per share today. Under a one-step binomial setting, its price
Questions 9 to 15 are based on the following information: IBM is trading at $72 per share today. Under a one-step binomial setting, its price can either go up to $100 in a good economy or go down to $60 per share in a bad economy next year. For simplicity, let's assume the interest rate on T-Bill is zero and the stock does not pay dividend. Question 14 (1 point) Saved (*) A digital option is an option that always pays off $1 if the option expires in the money, and $0 otherwise. For example, in this question a digital call option with a strike price of $80 will pay only $1 rather than $20 when stock price goes to $100, and $0 otherwise. What should be the price for this digital call option today? $0 $0.3 $0.7 $1 Questions 9 to 15 are based on the following information: IBM is trading at $72 per share today. Under a one-step binomial setting, its price can either go up to $100 in a good economy or go down to $60 per share in a bad economy next year. For simplicity, let's assume the interest rate on T-Bill is zero and the stock does not pay dividend. Question 14 (1 point) Saved (*) A digital option is an option that always pays off $1 if the option expires in the money, and $0 otherwise. For example, in this question a digital call option with a strike price of $80 will pay only $1 rather than $20 when stock price goes to $100, and $0 otherwise. What should be the price for this digital call option today? $0 $0.3 $0.7 $1
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