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13.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.$2.24
B.$2.44
C.$2.64
D.$2.84
A.$2.24
B.$2.44
C.$2.64
D.$2.84
Answer: A
The probability of an up movement is
The tree is
The probability of an up movement is
The tree is
Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015