Use the binomial tree technique to price a one year American call option with strike price $65, written on a $60 stock. Use a two step tree, with 6 month time steps. Volatility is 18%. The stock will pay a dividend in 7 months time of $4. Interest rates are 7%, with continuous compounding.
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Use the binomial tree technique to price a one year American call option with strike price $65, written on a $60 stock. Use a two step tree, with 6 month time steps. Volatility is 18%. The stock will pay a dividend in 7 months time of $4. Interest rates are 7%, with continuous compounding.
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- The current price of a non-dividend paying stock is $50. Use a two-step tree to value a European put option on the stock with a strike price of $50 that expires in 12 months. Each step is 6 months, the risk free rate is 5% per annum, and the volatility is 50%. What is the value of the option according to the two-step binomial model. Please enter your answer rounded to two decimal places (and no dollar sign).You want to price an American Put option that is written on the stock of Shelby Ltd. The price of the stock is £20, the risk-free interest rate is 5%, the annualised volatility of the stock is 42% and the option expires in 5 months. Given that information, calculate the up-multiplier to be used in a nine-step binomial tree. Write your answer in decimal form with up to three decimal points Answer:A stock has a current price of $67. An option on this stock that expires in six months has an exercise price of $65. The stock will pay a dividend of $5 in three months. Assume an annualized volatility of 30% and a continuously compounded risk - free rate of 5% per annum. Use the Black - Sholes - Merton model to price this option. 1) Suppose the option is a European put. Calculate the value of the put. 2) Suppose this option is an American call. Use Black's approximation to calculate the value of this call.
- A stock has a price of $37 and an annual return volatility of 59 percent. The risk-free rate is 3.13 percent. Perform calculations in Excel. a. Calculate the European call and European put option prices with a strike price of $38.00 and a 90-day expiration. (Use 365 days in a year. Do not round Intermediate calculations. Round your answers to 2 decimal places.) Call premium Put premium b. Calculate the deltas of the European call and European put. (Use 365 days In a year. A negative value should be Indicated by a minus sign. Do not round Intermediate calculations. Round your answers to 4 decimal places.) Call delta Put deltaConsider a European call option on a stock with current price $100 and volatility 25%. The stock pays a $1 dividend in 1 month. Assume that the strike price is $100 and the time to expiration is 3 months. The risk free rate is 5%. Calculate the price of the the call option.Value of a stock is currently at $40. Volatility of that stock is 30% per year and risk- free interest rate with continuous compounding is at 2.5% per year. Find the value of a 6-month call and a 6-month put option using a two-step binomial model. Both options have strike price of $41.
- The current price of a stock is $21. In 1 year, the price will be either $26 or $16. The annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price of $22 and that expires in 1 year. (Hint: Use daily compounding.) Assume a 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent.The 6-months risk free rate is equal to 2% (Rf = 2%). By the end of the 6 %3D months period the stock will either increase by a factor of 1.3 or fall by a factor of 0.8. The current stock price is $110. Find the current price of the one year At the Money Call option relying on the replication approach. Use four decimal places in all calculations. O a 17.5479 Ob. 18.9245 OC. 77.3829 Od. None of the given choices is correct 70.2101The current price of a stock is $20, and at the end of one year its price will be either $22 or $18. The annual risk-free rate is 2.0% (use daily compounding with 365 days/year), based on daily compounding. A 1-year call option on the stock, with an exercise price of $19, is available. Based on the binominal model, what is the option's value?(Please Show Work)
- The current price of a stock is $22, and at the end of one year its price will be either $27 or $17. The annual risk-free rate is 6.0%, based on daily compounding. A 1-year call option on the stock, with an exercise price of $22, is available. Based on the binomial model, what is the option's value? (Hint: Use daily compounding.)Suppose the stock price is $20 today. In the next six months it will either fall by 50 percent or rise by 50 percent. What is the current value of a call option with an exercise price of $15 and expiration of one year? The six-month risk-free interest rate is 10 percent (periodic rate). Use the two-stage binomial method. $7.86 $2.14 $8.23 $8.93XYZ stock is currently traded at $40. Consider a put option on XYZ with $38 exercise price expiring in 6 months. Estimate the price of the option using two-period BOPM. Assume the stock price can go up by 10% and down by 15% each period (i.e., (6 months) / (2 periods) = 3 months). The annual risk-free interest rate is 6%. please use excel and show formulas. thanks!