Question
The current price of a stock is $20. In 1 year, the price will be either $26 or $16. The annual risk-free rate is 8%.
The current price of a stock is $20. In 1 year, the price will be either $26 or $16. The annual risk-free rate is 8%. Find the price of a call option on the stock that has a strike price of $21 and that expires in 1 year.
- A. $4.68
- B. $1.88
- C. $3.39
- D. $2.62
- E. $1.25
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International Financial Management
Authors: Jeff Madura
3rd Edition
0314862722, 978-0314862723
