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

question 10

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 si 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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