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The current price of a non-dividend-paying stock is $58.16 and you expect the stock price to either go up by a factor of 1.564 or
The current price of a non-dividend-paying stock is $58.16 and you expect the stock price to either go up by a factor of 1.564 or down by a factor of 0.639 over the next 0.8 years. A European call option on the stock has a strike price of $58 and expires in 0.8 years. The risk-free rate is 6% (annual, continuously compounded). Attempt 1/3 for 10 pts. Part 1 What is the option payoff if the stock price goes up? 0+ decimals Submit Attempt 1/3 for 10 pts. Part 2 What is the risk-neutral probability of an up movement? 2+ decimals Submit Attempt 1/3 for 10 pts. Part 3 What is the value of the option? 1+ decimals The current price of a non-dividend-paying stock is $58.16 and you expect the stock price to either go up by a factor of 1.564 or down by a factor of 0.639 over the next 0.8 years. A European call option on the stock has a strike price of $58 and expires in 0.8 years. The risk-free rate is 6% (annual, continuously compounded). Attempt 1/3 for 10 pts. Part 1 What is the option payoff if the stock price goes up? 0+ decimals Submit Attempt 1/3 for 10 pts. Part 2 What is the risk-neutral probability of an up movement? 2+ decimals Submit Attempt 1/3 for 10 pts. Part 3 What is the value of the option? 1+ decimals
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