Draw the Binomial Tree Listing Only the Stock Prices at Each

question 4

Essay

Draw the binomial tree listing only the stock prices at each node.Assume the following data on a 6-month call option,using 3-month intervals as the time period.K = $70,S = $68.50,r = 6.0%,σ = 0.32

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Definitions:

Discrepancies

Differences or inconsistencies found within related facts, figures, or statements, often requiring further investigation or adjustment.

Variable N

A symbol or placeholder for an unknown or changing quantity in mathematics and science.

Certificate Of Deposit (CD)

A certificate that states there is a specific sum of money on deposit and guarantees the payment of a fixed interest rate after a certain period of time, usually seven days to ten years; deposits and withdrawals cannot be made with a CD.

Money Market Account

An account that pays a higher interest rate than other types of accounts, but usually requires a higher initial deposit and a higher minimum balance often with a limit on the number of transactions per month.