Economics question

You are offered a European Call option. This means you will have the option, but not the obligation, to buy

the stock at the strike price K of $95 The price of the stock today is $90. Your time discount rate is

Beta=0.98, the risk-less rate of interest is 3%.
The price of the stock follows the following process over two periods: with probability 75% the
price will not change from period 0 to period 1, but with probability 25% will go up to $130.
Then from period 1 to period 2, with probability 50% the price will stay the same, and with
probability 50% the price will go down by 5%.
How much would you be willing to pay as of period 0 for this option?

Sample Solution

find the cost of your paper

This question has been answered.

Get Answer