Find the value (using Binomial Tree) of a European style call option on an underlying stock which is currently selling at RM10 with the following assumptions: • The call option on the stock has a RM10 exercise price and one year maturity; • Change in price three times during the one year; • The percentage change in the stock’s price is 10%, that is, it can either go up or down by a fixed 10%; • The probability of an up is 60% and down movement is an equal 40%; and • Interest rate is 8% per annum
Find the value (using Binomial Tree) of a European style call option on an underlying stock which is currently selling at RM10 with the following assumptions: • The call option on the stock has a RM10 exercise price and one year maturity; • Change in price three times during the one year; • The percentage change in the stock’s price is 10%, that is, it can either go up or down by a fixed 10%; • The probability of an up is 60% and down movement is an equal 40%; and • Interest rate is 8% per annum
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 4P: Put–Call Parity
The current price of a stock is $33, and the annual risk-free rate is 6%. A call...
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Find the value (using Binomial Tree) of a European style call option on an underlying stock which is currently selling at RM10 with the following assumptions:
• The call option on the stock has a RM10 exercise price and one year maturity;
• Change in price three times during the one year;
• The percentage change in the stock’s price is 10%, that is, it can either go up or down by a fixed 10%;
• The probability of an up is 60% and down movement is an equal 40%; and • Interest rate is 8% per annum
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