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The price of a share of Maxar stock is currently $100. It is known that at the end of 1 year, the Maxar share
The price of a share of Maxar stock is currently $100. It is known that at the end of 1 year, the Maxar share price will be either $133.33 or $75. The riskless interest rate is 4% per year. A. (10 points) Calculate the price of a 1-year European call option on Maxar stock with an exercise price of $100 by applying the replicating portfolio approach. B. (10 points) Calculate the price of a 1-year European call option on Maxar stock with an exercise price of $100 by applying the risk neutral valuation approach. C. (10 points) Calculate the price of a 1-year European put option on Maxar stock with an exercise price of $100. D. (20 points) Next, add another 1-year timestep; i.e., it is known that at the end of 2 years, the Maxar share price will be $177.78, $100, or $56.25. Calculate the price of a 2-year European call option on Maxar stock with an exercise price of $100. Also calculate the price of a 2-year European put option on Maxar stock with an exercise price of $100.
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