What is the value of a one-month european call
Course:- Business Economics
Reference No.:- EM132281371

Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Business Economics

A stock price is currently $40. It is known that at the end of one month that the stock price will either increase or decrease by 9%. The risk-free interest rate is 9% per annum with continuous compounding. What is the value of a one-month European call option with a strike price of $39?

*Equations you may find helpful:

p = (e^(rΔt)-d) / (u-d)

f = e^(-rΔt) * (fu*p + fd*(1-p))

(required precision 0.01 +/- 0.01)

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Business Economics) Materials
Suppose Charlie Brown opens a lemonade stand. He hires Linus and Lucy for $12 a week ($6 each). He "rents" pitchers and spoons from his mother for $5 a week and spends $20 a w
Consider the aggregate production function, Y = K^1/3 L^2/3. Assume the macroeconomy is in competitive equilibrium where capital and labor are paid their respective marginal p
Demand is given by : Qd=20-3P Supply is given by: Qs= 2 + 3p what is the cost to a government that sets a price floor of $4 in this market and then agrees to buy up any surplu
Based on the best available econometric estimates, the market elasticity of demand for your firm’s product is -1.5. The marginal cost of producing the product is constant at $
Excess capacity is a problem in monopolistic competition because if there were fewer firms in the industry: Consider a two-firm oligopoly facing a market inverse demand curve
You are the owner of a fast-food restaurant. Given a new item that you recently advertised, you experience additional demand for your business that you do not want to ignore.
A forklift can be purchased for $30,000. The market value of the forklift decreases by 20% of the previous year’s value for 2 years, and then by 15% in years 3 through 10. Mai
The Dolly Madison Inc at Emporia estimated the following elasticities for a special type of doughnuts: price elasticity EP = 2, income elasticity EI = 1, and cross elasticity