• What is the price of a 1-year call option with a strike price of 30 dollars on a stock that is currently trading at 28 dollars? Assume the risk free rate to be 4%. Stock price could either increase by 8% or decrease by 8%.
• Estimate:
• The probability of price increase
• The probability of price decrease
• The 1-year call option price
• The 1-year put option price
• The 2-year call option price
• The 2-year put option price