Question
The current price of a non-dividend paying stock is $40. Use a two-step tree to value a European call option on the stock with a
The current price of a non-dividend paying stock is $40. Use a two-step tree to value a European call option on the stock with a strike price of 42 that expires in 1 year. Each step is 6 months, the risk-free rate is 7% per annum with continuous compounding. What is the European call option price when u = 1.1 and d = 0.9 ?
| $3.74 | ||
| $2.74 | ||
| $4.74 | ||
| $1.75 | ||
| $5.75 |
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International Finance Theory And Policy
Authors: Paul Krugman, Maurice Obstfeld, Marc Melitz
12th Global Edition
1292417005, 978-1292417004
