Chapter 03 · Section 3.1
Binomial Pricing Question 2
Stock XYZ costs 110. There is a call option and a put option listed on this stock, both with an exercise price of 100. There is a 50% probability that the stock could go up to a level of 143 and a 50% probability that the stock could go down to a level of 99. The risk free interest rate is 10%. Given these hypotheses, what should be the current value of the call?
a) -21.50
b) -1
c)
d)
e)
f)
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