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A stock price is currently $60. Over each of the next two three-month periods it is...

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Finance

A stock price is currently $60. Over each of the next twothree-month periods it is expected to go up by 6% or down by 5%.The risk-free interest rate is 8% per annum with continuouscompounding. What is the value of a six-month European call optionwith a strike price of $61?

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Answer Value of one year European Call Option 251 Note 31 Alternatively Value will be 250 Note 32 when calculations are not as accurately done but acceptable Note 1 Basic Data Strike price 61 Spot price 60 Maximum price after one move 60 x 106 636 Minimum price after one move 60 x 95 57 Maximum price    See Answer
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A stock price is currently $60. Over each of the next twothree-month periods it is expected to go up by 6% or down by 5%.The risk-free interest rate is 8% per annum with continuouscompounding. What is the value of a six-month European call optionwith a strike price of $61?

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