Susan is using the binomial model, she observes a stock currently selling for $45and estimates it will either go up to $55 or down to $44. If the strike price is $45,the risk-free rate of interest is 5% a year and options will expire in a year, what isthe value of the call option?$0.26$2.81$0.95$1.83

Call option is derivative product and derive value from underlying stocks and gives option to buy…

Susan is using the binomial model, she observes a stock currently selling and estimates it will either go up to $55 or down to $44. If the strike pri the risk-free rate of interest is 5% a year and options will expire in a year the value of the call option? $0.26 $2.81 $0.95

Susan is using the binomial model, she observes a stock currently selling and estimates it will either go up to $55 or down to $44. If the strike pri the risk-free rate of interest is 5% a year and options will expire in a year the value of the call option? $0.26 $2.81 $0.95

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Susan is using the binomial model, she observes a stock currently selling for $45
and estimates it will either go up to $55 or down to $44. If the strike price is $45,
the risk-free rate of interest is 5% a year and options will expire in a year, what is
the value of the call option?
$0.26
$2.81
$0.95
$1.83

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