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Suppose that we have a stock with a price of $75. We want to price...

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Accounting

Suppose that we have a stock with a price of $75. We want to price a call option using the binomial model that has a strike price of $82. We are going to use steps of 5 days and price it for 20 days, so today plus four more time steps. The stock has a volatility of 47% and the risk free rate is 1%.

What is our DOWN multiplier?

A.

.9324
B.

.9465
C.

1.034
D.

1.567

Suppose that we have a stock with a price of $75. We want to price a call option using the binomial model that has a strike price of $82. We are going to use steps of 5 days and price it for 20 days, so today plus four more time steps. The stock has a volatility of 47% and the risk free rate is 1%.

What is the highest stock price on day 10?

A.

$67.55
B.

$83.72
C.

$95.78
D.

$108.83

Suppose that we have a stock with a price of $75. We want to price a call option using the binomial model that has a strike price of $82. We are going to use steps of 5 days and price it for 20 days, so today plus four more time steps. The stock has a volatility of 47% and the risk free rate is 1%.

What is the call option premium on day 20 for the stock price of $67.19?

A.

$0
B.

$.10
C.

$.78
D.

$1.83

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