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A stock price is currently $50. It is known that at the end of two months...

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Finance

A stock price is currently $50. It is known that at the end oftwo months it will be either $53 or $48. The risk-free interestrate is 10% per annum with continuous compounding. What is thevalue of a two-month European call option with a strike price of$49?

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4.4 Ratings (907 Votes)
Strike price 4900 Current Market price 5000 Riskfree rate 10 per annum or 010 Rate for 2 month 10212 001666666667 Continuous compounding    See Answer
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A stock price is currently $50. It is known that at the end oftwo months it will be either $53 or $48. The risk-free interestrate is 10% per annum with continuous compounding. What is thevalue of a two-month European call option with a strike price of$49?

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