Draw the Tree for a Call Option on $20,000 with a Strike

question 28

Multiple Choice

Draw the tree for a call option on $20,000 with a strike price of £10,000.The current exchange rate is £1.00 = $2.00 and in one period the dollar value of the pound will either double or be cut in half.The current interest rates are i_$ = 3% and are i_£ = 2%.

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Definitions:

Retain

To keep in possession or continue to use or employ.

Motivate

The process of stimulating people to actions that fulfill their needs or expectations, often used in the context of leadership or personal development.

Return On Investment

A financial metric used to measure the efficiency of an investment by comparing the gain (or loss) from an investment to its cost.

Training

The act of enhancing the knowledge, skills, and competencies of an individual or group for a specific purpose, such as improving performance in current or future roles.