Use a two period binomial tree to price a 12 month European style put option on YMMV struck at $16. The spot price of YMMV is $15.25 and it pays no dividends. Assume u/d = 4/3, pup = 1/3, and r = 9.75%. A) $1.25 B) $0.96 C) $0.72 D) $0.58 E) $1.30

Use a two period binomial tree to price a 12 month European style put option on YMMV struck at $16. The spot price of YMMV is $15.25 and it pays no dividends. Assume u/d = 4/3, pup = 1/3, and r = 9.75%. A) $1.25 B) $0.96 C) $0.72 D) $0.58 E) $1.30

Algebra & Trigonometry with Analytic Geometry

13th Edition

ISBN:9781133382119

Author:Swokowski

Publisher:Swokowski

Chapter4: Polynomial And Rational Functions

Section4.3: Zeros Of Polynomials

Problem 56E

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Question

Use a two period binomial tree to price a 12 month European style put
option on YMMV struck at $16. The spot price of YMMV is $15.25 and it
pays no dividends. Assume u/d = 4/3, pup = 1/3, and r = 9.75%.
A) $1.25
B) $0.96
C) $0.72
D) $0.58
E) $1.30

Expert Solution