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18 March, 02:27

A stock price is currently $50. Over each of the next two three-month periods it is expected to go up by 6% or down by 5%. The risk-free interest rate is 5% per annum with continuous compounding. What is the value of a six-month European call option with a strike price of $51

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  1. 18 March, 02:37
    0
    Using

    F=P (1+i) ^n

    i=0.06

    F=50 (1+0.06) ^5

    F=$66.9
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