Given todays stock price is 40 one month from now the stock, Ask an Expert

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Given: Today's stock price is 40. One month from now, the stock price will be either 26 or 34. If it is 34, then the following month the stock price will be either 39 or 31. If it is 26 one month from now, then the following month the price will be either 21 or 31. The risk-free rate of interest is 1% per month. How much should one be willing to pay today for a call option on the stock with K = 32 and T = 2 months? Construct the binomial tree for a European call option. At each node, provide the call premium (i.e., value) as well as ? and B.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M93057633

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