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The spot price of zinc, a metal used to protect steel products and structures from corrosion, is currently 17 SEK per kilogram, and each month
The spot price of zinc, a metal used to protect steel products and structures from corrosion, is currently 17 SEK per kilogram, and each month for the next two months it is expected to either increase by 2% or decrease by 3%. Assume that the risk-free rate of interest is 4.75%. Use a two-step binomial tree model to calculate the value of a two-month American option contract written on 900 kilograms of zinc that pays off: (ST)(15 - ST) per kilogram of zinc, where St denotes the spot price of zinc on the maturity date of the option contract (note: in your answer you do not need to show the tree diagram, but rather just show the calculations associated with the nodes in it). The spot price of zinc, a metal used to protect steel products and structures from corrosion, is currently 17 SEK per kilogram, and each month for the next two months it is expected to either increase by 2% or decrease by 3%. Assume that the risk-free rate of interest is 4.75%. Use a two-step binomial tree model to calculate the value of a two-month American option contract written on 900 kilograms of zinc that pays off: (ST)(15 - ST) per kilogram of zinc, where St denotes the spot price of zinc on the maturity date of the option contract (note: in your answer you do not need to show the tree diagram, but rather just show the calculations associated with the nodes in it)
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