Suppose ABCD's stock price is currently $50. In the next six months it will either fall to
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Question:
Suppose ABCD's stock price is currently $50.
In the next six months it will either fall to $40 or rise to $60.
What is the current value of a six-month call option with an exercise price of $50?
The six-month risk-free interest rate is 2 percent (periodic rate).
A. 5.39
B. 15.00
C. 8.09
D. 8.25
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