A call option on a stock index is valued using a three- step binomial tree with an up move that equals 1.05 and a down move that equals 0.95. The probability of the up move and of the down move is both 50%. The current level of the index is $190, and the option exercise price is $200. If the option value is positive when the stock price exceeds the exercise price at expiration and $0 otherwise, the number of terminal nodes with a positive payoff is: Group of answer choices two one thre
A call option on a stock index is valued using a three- step binomial tree with an up move that equals 1.05 and a down move that equals 0.95. The probability of the up move and of the down move is both 50%. The current level of the index is $190, and the option exercise price is $200. If the option value is positive when the stock price exceeds the exercise price at expiration and $0 otherwise, the number of terminal nodes with a positive payoff is: Group of answer choices two one thre
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter5: Financial Options
Section: Chapter Questions
Problem 1P
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A call option on a stock index is valued using a three- step binomial tree with an up move that equals 1.05 and a down move that equals 0.95. The probability of the up move and of the down move is both 50%. The current level of the index is $190, and the option exercise price is $200. If the option value is positive when the stock price exceeds the exercise price at expiration and $0 otherwise, the number of terminal nodes with a positive payoff is: Group of answer choices two one three
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