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The answers to the question should come out to b.) $3.35 c.) $2.33 I am looking for the work for how to acheive these answers
The answers to the question should come out to
b.) $3.35
c.) $2.33
I am looking for the work for how to acheive these answers and also the tree diagram for A.
1. Suppose that firm Ds shares are currently selling for $38. After six months it is estimated that the share price will either rise to $43.32 or fall to$33.82. If the share price rises to $43.32 in six months, six months from that date (1 year from today) the price is estimated to be either $49.38 or $38.55. If the share price falls to $33.82 in six months, six months from that date (1 year from today) the price is estimated to be either $38.55 or S30.10. a. Sketch the tree diagram of price changes over the year b. Suppose that a European put option with an exercise price of $41 is written today and will expire in 1 year. If the six month risk free rate is 2.5 percent, use the binomial model to estimate the current value of the put option. c. Use Put-Call parity to find the value of a call option written on the same shares with the same exercise price and expiration dateStep by Step Solution
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