Question
Stock price is currently $49 in the next year it will either fall by 29% or rise by 40.85%. The call has an exercise price
Stock price is currently $49 in the next year it will either fall by 29% or rise by 40.85%. The call has an exercise price of price of $47 and expiration of one year. The risk free rate is 5% per year.
What is the current value of the risk neutral probability of the up move?
What is the price of the call? (use risk neutral method)
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Financial Reporting and Analysis
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon
6th edition
9780077632182, 78025672, 77632184, 978-0078025679
