Question
Suppose AT&T's current stock price is $100 and it is expected to either rise to 130 or fall to 80 by next April (assume 6-months
Suppose AT&T's current stock price is $100 and it is expected to either rise to 130 or fall to 80 by next April (assume 6-months from today). Also assume you can borrow at the risk-free rate of 2% per 6 months. Using the binomial approach, what would you pay for a call option on AT&T that expires in 6-months and has a strike price of $105? A strike price of $110?
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Modern Portfolio Theory and Investment Analysis
Authors: Edwin Elton, Martin Gruber, Stephen Brown, William Goetzmann
9th edition
9781118805800, 1118469941, 1118805801, 978-1118469941
