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Today is May 1st and a share of Microsoft stock is trading for $252. Microsoft pays an annual divided yield of 2.5% of the stock
Today is May 1st and a share of Microsoft stock is trading for $252. Microsoft pays an annual divided yield of 2.5% of the stock price. An American call option on the stock has a strike price of $250 and expires on Oct 1st. Suppose that the annual return volatility of Microsoft stock is 23% and that the risk-free rate is 2% (continuously compounded). Use the 2-step binomial-tree model to calculate the price (premium) of this option. O 14.21 14.45 11.39 13.11 23.29
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