European call option on stock when the stock price

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1. Binomial tree. A stock price is currently $40. It is known that at the end of 1 month it will be either $42 or $38. The risk-free rate is 8% per annum with daily compounding. What is the value of a 1-month European put option with a strike price of $39? [Hint: Use exactly the same procedure as the call option but evaluate the put option payoffs instead].

2. lack-Scholes Model. What is the price of a European call option on a stock when the stock price is $52, the strike price is $50, the risk-free rate is 12% per annum, the volatility is 30% per annum, and the time to expiration is 3 months?

Reference no: EM131829353

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