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The volatility of a non-dividend-paying stock whose price is $80 is 40%. The risk-free rate...

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The volatility of a non-dividend-paying stock whose price is $80 is 40%. The risk-free rate is 3% per annum (continuously compounded) for all maturities. Each time step is of length 3 months. Use this information to answer this and the next two questions. The values of u, d, and p are: O a. 1.2414, 0.8187, 0.4689 O b. 1.2314, 0.8187, 0.4689 O c. 1.2214, 0.8187, 0.4689 The value of a six-month European call option with a strike price of $100 given by a two-step binomial tree is closest to: O a. 8.9360 Ob $4.5016 Oc. $4.1901 Suppose a trader sells 1,000 European call options (10 contracts) with a strike price of $100 and six months to the expiration date. The position in the stock which is necessary to hedge the trader's position at the time of the trade is: O a. Buy 290.5 shares O b. Buy 289.5 shares O c. Buy 279.5 shares

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