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The price of a stock is currently $50. Over the course of the next year, the price is anticipated to rise to $55 or decline
The price of a stock is currently $50. Over the course of the next year, the price is anticipated to rise to $55 or decline to $46. If both outcomes are equally likely and the risk free interest rate is 3%, what is the price of a one year call option with an exercise price of $50 using the binomial model?
$2.43 | ||
$2.50 | ||
$2.66 | ||
$2.70 |
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