Question

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.

Answer #1

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.

You are attempting to value a call option with an exercise price
of $150 and one year to expiration. The underlying stock pays no
dividends. Its current price is $100. The stock price either
increases by a factor of 1.5, or decreases by a factor of 0.5,
every six months. The risk-free rate of interest is 2% per year (or
1% per six-month period).
What is the value of this call option using the two-period
binomial option pricing model? (Do...

A call option with an exercise price of $110 has six months to
the expiration date.
Currently, the stock is sold at a price of $120. At the expiration
date, the underlying stock has
two possible ending prices: $150 or $105. The risk-free rate of
return is 8 percent per annum.
Calculate the price of this call option using binomial option
pricing model.

currently, a call option on Bayou stock is available with an
exercise price of $100 and an expiration date one year from now.
Assume that the price of Bayou corporation stock today is $100.
Furthermore, it is estimated that Bayou stock will be selling for
either $75 or $143 in one year. Also, assume that the annual
risk-free interest rate on a one year Treasury bill is 10 percent,
continuously compounded. Therefore, the T-bill will pay $100 x
e^(0.1), or...

Currently, a call option on Bayou stock is available with an
exercise price of $100 and an expiration date one year from now.
Assume that the price of Bayou Corporation stock today is $100.
Furthermore, it is estimated that Bayou stock will be selling for
either $62 or $152 in one year. Also, assume that the annual
risk-free interest rate on a one-year Treasury bill is 10 percent,
continuously compounded. Therefore, the T-bill will pay $100 ×
e^(0.1), or $110.25....

You are attempting to value a call option with an exercise price
of $55 and one year to expiration. The underlying stock pays no
dividends, its current price is $55, and you believe it has a 50%
chance of increasing to $85 and a 50% chance of decreasing to $25.
The risk-free rate of interest is 6%. Based upon your assumptions,
calculate your estimate of the the call option's value using the
two-state stock price model. (Do not round intermediate...

The price of DEF Corp. stock is $50 per share and the call
option on the stock has a price of $10 and an exercise price of
$45, with a time to maturity of one year. Assume the risk-free rate
is 6%.
If the volatility of the stock is 20% during the year, use the
two-state model to derive the price of the option.

3) For a call option on a non dividend paying stock the stock
price is $30, the strike price is $20, the risk free rate is 6% per
annum, the volatility is 20% per annum and the time to
maturity is 3 months. Use the Binomial model to
find:
a) The price of the call option?
Can you show the binomial model please

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...

Question 34
Black-Scholes
Option-Pricing
S
45
Current
stock price
X
50
Exercise
price
r
5.00%
Risk-free
rate of interest
T
9 months
Time to
maturity of option
Variance
6.308%
Stock
volatility
1.
Call option price =
4.63
2.
Call option price =
2.83
3.
Call option price =
2.93
4.
Call option price =
2.63
5.
None of Above

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