Question

YBM’s stock price S is $102 today. — After six months, the stock price can either...

YBM’s stock price S is $102 today.

— After six months, the stock price can either go up to $115.63212672, or go down to $93.52995844.

— Options mature after T = 6 months and have an exercise price of K = $105.

— The continuously compounded risk-free interest rate r is 5 percent per year.

Given the above data, the pseudo-probability of an up movement and the discounted expected stock price using the pseudo-probabilities are given by:

Group of answer choices

0.45 for the pseudo-probability and 105 for the stock price

0.50 for the pseudo-probability and 100 for the stock price

0.50 for the pseudo-probability and 102 for the stock price

0.45 for the pseudo-probability and 102 for the stock price

Homework Answers

Answer #1

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Answer: 0.50 for the pseudo-probability and 102 for the stock price.

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