Question
The price of Ervin Corp. stock will either be $68 or $85 at the end of the year. Call options are available with one year
The price of Ervin Corp. stock will either be $68 or $85 at the end of the year. Call options are available with one year until expiration. Continuously compounded T-bills currently yield 5.99 %. Suppose the current price of Ervin stock is $74.
What is the value of the call option, using the risk-free approach, if the strike price is $55 per share? (Round answer to 2 decimal places. Do not round intermediate calculations).
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Case Studies In Finance
Authors: Robert Bruner, Kenneth Eades, Michael Schill
6th Edition
0073382450, 978-0073382456
