The Current Price of a Non-Dividend Paying Stock Is $30

question 4

Multiple Choice

The current price of a non-dividend paying stock is $30.Use a two-step tree to value a European call option on the stock with a strike price of $32 that expires in 6 months.Each step is 3 months,the risk free rate is 8% per annum with continuous compounding.What is the option price when u = 1.1 and d = 0.9?

• A) $1.29
• B) $1.49
• C) $1.69
• D) $1.89

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Alexander Hamilton

A Founding Father of the United States, known for his contributions as an economist, political philosopher, and as the first Secretary of the Treasury.

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An American Founding Father, the principal author of the Declaration of Independence, and the third President of the United States, serving from 1801 to 1809.

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