Question
Suppose Carol's stock price is currently $150. If the std deviation of continuously compounded returns on a stock is 50% per year. The annual risk-free
Suppose Carol's stock price is currently $150. If the std deviation of continuously compounded returns on a stock is 50% per year. The annual risk-free rate is 6%, compounded semi-annually.
A. Using one-step binomial tree, what is the current value of six-month call option with an exercise price of $180?
B. Using two-step binomial tree, what is the current value of a one-year put option with an exercise price of $120?
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Business Analysis And Valuation Using Financial Statements Text And Cases
Authors: Krishna G. Palepu, Paul M. Healy, Victor L Bernard
3rd Edition
0324118945, 9780324118940
