Question
Spot price 100 Strike price 85 Continuously compounded Risk-free rate 2% Continuous Dividend Yield 3% Time to maturity 1 year Annualized volatility 0.3 European call
| Spot price | 100 |
| Strike price | 85 |
| Continuously compounded Risk-free rate | 2% |
| Continuous Dividend Yield | 3% |
| Time to maturity | 1 year |
| Annualized volatility | 0.3 |
| European call option premium | 22.4 |
| u | 1.3364 |
| d | 0.7334 |
(a) If the option is American style, in which node do you want to exercise before expiration?
A. Node u
B. Node d
(b) What is the American call option premium?
Coau SC 1,111 SC B d'dd SCStep by Step Solution
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Contemporary Issues In Finance
Authors: Simon Grima, Frank Bezzina, Inna Romanova
1st Edition
1786359073, 978-1786359070
