O 75% O 50% O 10% 5 pts Question 18 Stock A is currently traded...
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O 75% O 50% O 10% 5 pts Question 18 Stock A is currently traded at $100. Each year, the stock price can either go up by 10% or drop by 10%. Your manager asks you to price an European call option with a strike price of $85 and a maturity of two years from now. The YTM of a one-year zero Treasury bond is 4% and the forward rate from year one to year two is 6% Surpose the discount rate you use is 5% for the second period, what is the risk neutral probability for stock price to reach $81 on maturity date. Assume that you are computing the probability as of now. 17.5% 07:55 4003 0 35.0% L
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