Question

The current stock price is $55. The price a year from today will be either 35...

The current stock price is $55. The price a year from today will be either 35 or 95 with equal probabilities. the investior can borrow at 7%. Using two step binomial pricing model, the value of one year call option of the option with a strike price of 75$ should be?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1- A one-year European call option on Stanley Industries stock with a strike price of $55...
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...
The current stock price of firm AAa= $20. It is expected that this firm’s stock price...
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...
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)?
Suppose AT&T’s current stock price is $100 and it is expected to either rise to 130...
Suppose AT&T’s current stock price is $100 and it is expected to either rise to 130 or fall to 80 by next April (assume 6-months from today). Also assume you can borrow at the risk-free rate of 2% per 6 months. Using the binomial approach, what would you pay for a call option on AT&T that expires in 6-months and has a strike price of $105? A strike price of $110?
The current price of MB Industries stock is $20 per share. In the next year the...
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)?
The current price of Rock Pound Corporation stock is $10. In the next year, this stock...
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
1. A call option with a strike price of $35 on ABC stock expires today. The...
1. A call option with a strike price of $35 on ABC stock expires today. The current price of ABC stock is $30. The call is: 2. A put option with a strike price of $35 on ABC stock expires today. The current price of ABC stock is $30. The put is: a. at the money b. out of the money c. in the money d. none of the above
The price of Ervin Corp. stock will either be $64 or $82 at the end of...
The price of Ervin Corp. stock will either be $64 or $82 at the end of the year. Call options are available with one year until expiration. Continuously compounded T-bills currently yield 3.43 %. Suppose the current price of Ervin stock is $75. What is the value of the call option if the strike price is $55 per share?
Current Price of Stock = 50 Divided Yield = 2% Strike Price = 55 Time to...
Current Price of Stock = 50 Divided Yield = 2% Strike Price = 55 Time to Expiry = 6 months Volatility = 35% Risk-Free rate =4% Using Black Scholes Model: 1. What is the Value of American Call option? 2. What is the Value of American Put Option? solve it in excel.
The current price of Natasha Corporation stock is $ 5.97 $5.97. In each of the next...
The current price of Natasha Corporation stock is $ 5.97 $5.97. In each of the next two​ years, this stock price can either go up by $ 2.50 $2.50 or go down by $ 2.00 $2.00. The stock pays no dividends. The​ one-year risk-free interest rate is 3.7 % 3.7% and will remain constant. Using the Binomial​ Model, calculate the price of a​ two-year call option on Natasha stock with a strike price of $ 7.00 $7.00. The price of...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT