Question

- The current price of a stock is $20, and at the end of one year its price will be either $10 or $30. Theannual risk-free rate is 6%, based on daily compounding. A one-year call option on the stock, with an exercise price of $16, is available. Based on the binomial model, what is the option’s value?

Answer #1

The current price of a stock is $32, and at the end of one year
its price will be either $37 or $27. The annual risk-free rate is
5%, based on daily compounding. A 1-year call option on the stock,
with an exercise price of $32, is available. Based on the binomial
model, what is the option's value? a. $3.286 b. $4.108 c. $3.158 d.
$5.363

The current price of a stock is $32, and at the end of one year
its price will be either $37 or $27. The annual risk-free rate is
5%, based on daily compounding. A 1-year call option on the stock,
with an exercise price of $32, is available. Based on the binomial
model, what is the option's value?
a.
$3.286
b.
$4.108
c.
$3.158
d.
$5.363

The current price of a stock is $30, and at the end of one year
its price will be either $33 or $27. The annual risk-free rate is
3.0%, based on daily compounding. Based on the binominal option
pricing model, what is the present value of a 1-year call option
with an exercise price of $26?

The current stock price of firm AAa= $20. It is expected that
this firm’s stock price will go up by 20%, or it might go down by
20%. No dividends. The one year risk free rate = 5%. A call
option’s strike price is also $20. Using the binomial pricing model
, calculate that to set up a risk free portfolio, for each call
option, how many stocks (or portion of a stock) is needed. 22.
Using the binomial pricing...

The current price of MB Industries stock is $20 per share. In
the next year the stock price will either go up to $24 per share or
go down to $16 per share. MB pays no dividends. The one year
risk-free rate is 5 percent and will remain constant. Using the
one-step binomial pricing model, what is the price of a one-year
CALL option on MB stock with a strike price of $20 (out to two
decimal places)?

The one year call option on Caddo Inc. stock has an exercise
price of 45. The current value of Caddo is 46. On the maturity
date, the value of Caddo will be either 51 or 43. The risk free
rate is 5%. Use the binomial option pricing model to find a fair
value for the call option.

The one year call option on Caddo Inc. stock has an exercise
price of 45. The current value of Caddo is 46. On the maturity
date, the value of Caddo will be either 51 or 43. The risk free
rate is 3%. Use the binomial option pricing model to find a fair
value for the call option.

The current price of Rock Pound Corporation stock is $10. In the
next year, this stock price can either increase by 20% or decrease
by 10% every six months. Rock Pound pays no dividends. The
effective semi-annual risk free interest rate is 2%, which will
remain constant forever. Using the risk neutral binomial model,
calculate the price of a one-year European call option on Rock
Pound stock with a strike price of $10

The current price of MB Industries stock is $20 per share. In
the next year the stock price will either go up to $24 per share or
go down to $16 per share. MB pays no dividends. The one year
risk-free rate is 5 percent and will remain constant. Using the
one-step binomial pricing model, what is the price of a one-year
PUT option on MB stock with a strike price of $20
(out to two decimal places)?

1- A one-year European call option on Stanley Industries stock
with a strike price of $55 is currently trading for $75 per share.
The stock pays no dividends. A one-year European put option on the
stock with a strike price of $55 is currently trading for $100. If
the risk-free interest rate is 10 percent per year, then what is
the current price on one share of Stanley stock assuming no
arbitrage?
2- The current price of MB Industries stock...

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