Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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3

The current price of a non-dividend paying stock is $100. Every three months, it is expected to go up or down by 10% or 6%, respectively. The risk-free rate is 4% per year with continuous compounding. Compute the price of a European call option with strike price $98 and maturity six months written on the stock. 15.68 Consider a non-dividend paying asset that trades for $96. Over the next six months, analysts expect that it could go up to $114 or down to $86. Compute the price of an at-the-money European put option expiring in six months. Assume that the risk-free rate is 6% per year with continuous compounding. Express your answer with two decimals. 7.28
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Transcribed Image Text:The current price of a non-dividend paying stock is $100. Every three months, it is expected to go up or down by 10% or 6%, respectively. The risk-free rate is 4% per year with continuous compounding. Compute the price of a European call option with strike price $98 and maturity six months written on the stock. 15.68 Consider a non-dividend paying asset that trades for $96. Over the next six months, analysts expect that it could go up to $114 or down to $86. Compute the price of an at-the-money European put option expiring in six months. Assume that the risk-free rate is 6% per year with continuous compounding. Express your answer with two decimals. 7.28
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