Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. (b) (6 points) the following one-period binomial s

(b) (6 points) The following one-period binomial stock price model was used to calculate the...

70.2K

Verified Solution

Question

Finance

image

(b) (6 points) The following one-period binomial stock price model was used to calculate the price of a one-year 10-strike call option on the stock. 12 10 8 You are given: The period is one year. The true probability of an up-move is 0.75. The stock pays no dividends. The price of the one-year 10-strike call is $1.13. Upon review, the analyst realize that there was an error in the model construction and that Sd, the value of the stock on a down-move, should have been 6 rather than 8. The true probability of an up-move does not change in the new model, and all other assumptions were correct. What is the actual price of the call option

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Geometry
1.2K views

20 What is the measure of the reference angle of 128 OA 52 B 232...

Physics
1.2K views

A single-coil loop of radius r = 7.40 mm, shown below, is formed in the middle...

General Management
1.2K views

Please read the article named "Leadership Development at 3M: New Process, NewTechniques, New Growth" which can be...

Biology
1.2K views

Valley fever, a medical condition caused by Coccidioides immitis, is caused byeating the fruiting body,...

Algebra
1.2K views

Divide the polynomial p x by the polynomial g x and find the quotient and...

Algebra
1.2K views

Which equation is y 6x 12x 10 rewritten in vertex form Hint graph both to...

Accounting
1.2K views

What is the difference between absorption costing and variable costing?

Accounting
1.2K views

taxes Help Nondomiciliary businesses are subject...

Accounting
1.2K views

The annual data that follow pertain to Escobar's Eyewear, a manufacturer of swimming goggles. (Escobar's...

Accounting
1.2K views

The beginning inventory is 10,400 units. All of the units that were mandatured during the...

Accounting
1.2K views

The LaGrange Corporation had the following budgeted sales for the first half of the current...

Accounting
1.2K views

eTextbook ment ERSION BACK Brief Exercise 6-15 (Part Level Submission) At the beginning of the...