Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
The current price of a stock is
$14
. In 6 months, the price will be either
$20
or
$12
. The annual risk-free rate is
7%
. Find the price of a call option on the stock that has a strike price of
$13
and that expires in 6 months. (Hint: Use daily compounding.) Assume a 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent.
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