Consider a European call on Amazon Stock (AMZN) that expires in one period. The current stock price is $100, the strike price is $120, and the risk-free rate is 5%. Assume AMZN stock will either go up to $140 or down to $80. Construct a replicating portfolio using shares of AMZN stock and a position in a risk-free asset ... what is the value of the call option? O Call Option Price = $4.84 O Call Option Price = $2.95 O Call Option Price = $7.93 O Call Option Price = $12.04

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Consider a European call on Amazon Stock (AMZN) that expires in one period. The current stock
price is $100, the strike price is $120, and the risk-free rate is 5%. Assume AMZN stock will either
go up to $140 or down to $80. Construct a replicating portfolio using shares of AMZN stock and a
position in a risk-free asset ... what is the value of the call option?
Call Option Price = $4.84
Call Option Price = $2.95
Call Option Price = $7.93
Call Option Price = $12.04
Transcribed Image Text:Consider a European call on Amazon Stock (AMZN) that expires in one period. The current stock price is $100, the strike price is $120, and the risk-free rate is 5%. Assume AMZN stock will either go up to $140 or down to $80. Construct a replicating portfolio using shares of AMZN stock and a position in a risk-free asset ... what is the value of the call option? Call Option Price = $4.84 Call Option Price = $2.95 Call Option Price = $7.93 Call Option Price = $12.04
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