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The current price of one share of XYZ stock is 100. The stock does not pay dividends. Over the next six months, the stock price
- The current price of one share of XYZ stock is 100. The stock does not pay dividends. Over the next six months, the stock price will either increase by 30%, or decrease by 20%. The continuously compounded risk-free rate is 6%. (a). Determine the price of a 6-month call option with a strike price of 110 using the replicating portfolio method. (B). Determine the price of a 6-month put option with a strike price of 110.
- The current price of one share of ZZZ stock is 80. The stock does not pay dividends. The stocks volatility is 25% and the continuously compounded risk-free rate is 8%.Use a one-step binomial tree model to determine the price of a three-month put option on the stock with a strike price of 80.
- The current price of a non-dividend paying stock is 100. Future stock prices follow the u and d defined in terms of the stocks volatility, which is . At the end of one year the price of the stock will either go up to 115.00 or down to 90.51.The continuously compounded risk-free rate is r. (A) Determine r and .
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