Question

The current price of a non-dividend paying stock is $30. Use a two-step tree to value...

The current price of a non-dividend paying stock is $30. Use a two-step tree to value a European put option on the stock with a strike price of $32 that expires in 6 months with u = 1.1 and d = 0.9. Each step is 3 months, the risk-free rate is 8%.

a. $2.545

b. $2.535

c. $2.238

d. $2.275

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The current price of a non-dividend paying stock is $50. Use a two-step tree to value...
The current price of a non-dividend paying stock is $50. Use a two-step tree to value a European put option on the stock with a strike price of $48 that expires in 6 months. Each step is 3 months, the risk-free rate is 4%, and u = 1.1 and d = 0.9. Please enter your answer rounded to two decimal places (and no dollar sign).
The current price of a non-dividend paying stock is $50. Use a two-step tree to value...
The current price of a non-dividend paying stock is $50. Use a two-step tree to value a European put option on the stock with a strike price of $50 that expires in 12 months. Each step is 6 months, the risk free rate is 5% per annum, and the volatility is 50%. What is the value of the option according to the two-step binomial mode
The current price of a non-dividend paying stock is $90. Use a two-step binomial tree to...
The current price of a non-dividend paying stock is $90. Use a two-step binomial tree to value a European call option on the stock with a strike price of $88 that expires in 6 months. Each step is 3 months, the risk free rate is 5% per annum with continuous compounding. What is the option price when u = 1.2 and d = 0.8? Assume that the option is written on 100 shares of stock.
Current price of a non-dividend paying stock is $50. Use a two-step tree to value an...
Current price of a non-dividend paying stock is $50. Use a two-step tree to value an AMERICAN PUT option on the stock with a strike price of $52 that expires in 6 months. Each step is 3 months and in each step the stock price either moves up by 10% or moves down by 10%. Suppose that the risk-free rate is 7% per annum continuous compounding. What should be this American put option price? $4.64 $6.10 $3.42 $7.43
The current price of a non-dividend paying stock is $50. Use a two-step tree to value...
The current price of a non-dividend paying stock is $50. Use a two-step tree to value a American put option on the stock with a strike price of $50 that expires in 12 months. Each step is 6 months, the risk free rate is 5% per annum, and the volatility is 50%. What is the value of the option according to the two-step binomial model. Please enter your answer rounded to two decimal places (and no dollar sign).
Today’s price of a non-dividend paying stock is $60. Use a two-step tree to value a...
Today’s price of a non-dividend paying stock is $60. Use a two-step tree to value a European call option on the stock with a strike price of $60 that expires in 6 months. Each step is 3 months. The risk free rate is 5% per annum with continuous compounding. Assume that the option is written on 100 shares of stock, and that u = 1.15 and d = 0.85. A)What is the option price today? B) How would you hedge...
The price of a non dividend pay stock is 60$. Use a two step tree to...
The price of a non dividend pay stock is 60$. Use a two step tree to value a European call option on the stock with a strike price of 60$ that expires in 6 months. The risk free rate is 5% with continuous compounding. Assume that the option is written on 100 shares of stock, and that u=1.15 and d=0.85. What is the option price today? How would you hedge a postiion wheere you buy the call option today?
Consider a European call option on a non-dividend-paying stock where the stock price is $40, the...
Consider a European call option on a non-dividend-paying stock where the stock price is $40, the strike price is $40, the risk-free rate is 4% per annum, the volatility is 30% per annum, and the time to maturity is 6 months. (a) Calculate u, d, and p for a two-step tree. (b) Value the option using a two-step tree. (c) Verify that DerivaGem gives the same answer. (d) Use DerivaGem to value the option with 5, 50, 100, and 500...
Price a European call option on non-dividend paying stock by using a binomial tree. Stock price...
Price a European call option on non-dividend paying stock by using a binomial tree. Stock price is €50, volatility is 26% (p.a.), the risk-free interest rate is 5% (p.a. continuously compounded), strike is € 55, and time to expiry is 6 months. How large is the difference between the Black-Scholes price and the price given by the binomial tree?
Price a European call option on non-dividend paying stock by using a binomial tree. Stock price...
Price a European call option on non-dividend paying stock by using a binomial tree. Stock price is €50, volatility is 26% (p.a.), the risk-free interest rate is 5% (p.a. continuously compounded), strike is € 55, and time to expiry is 6 months. How large is the difference between the Black-Scholes price and the price given by the binomial tree?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT