European call option and six-month european put option

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Reference no: EM131541435

The current price of a non-dividend-paying biotech stock is $140 with a volatility of 25%. The risk-free rate is 4%. For a three-month time step:

(a) What is the percentage up movement?

(b) What is the percentage down movement?

(d) What is the probability of a down movement in a risk-neutral world?

Use a two-step tree to value a six-month European call option and a six-month European put option. In both cases the strike price is $150.

u=13.31

d=11.75

the probability up =0.5089

the probalility down=0.4911

how to do the tree for valuing the tree and show me step by step.

Reference no: EM131541435

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