Question
Stock price is $100 now. In one period, it can go up to $125 or down to $90. Interest rate per period is 5%. A
Stock price is $100 now. In one period, it can go up to $125 or down to $90. Interest rate per period is 5%. A call option expiring at the end of the period has a strike price of X = 115.
Which of the data above is inconsistent with the binomial model?
a.If the "up" price is $125, then the "down" price cannot be $90
b.If the "up" price is $125, then the option strike price cannot be $115
c.If the option strike price is $115, then the stock price today cannot be $100
d.If the "up" price is $125 and the "down" price is $90, then the interest rate cannot be 5%
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