Suppose that we have a stock with a price of $75. We want to price...
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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 discounting rate?
A.
0
B.
.8776
C.
.8799
D.
.9999
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 probability of up?
A.
.3889
B.
.4875
C.
.4884
D.
.5123
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