The stock of Splish Brothers is currently trading for $40 and will either rise to $48...
The stock of Splish Brothers is currently trading for $40 and will
either rise to $48 or fall to $36 in one month. The risk-free rate
for one month is 1.5 percent. What is the value of a one-month call
option with a strike price of $40? (Round intermediate
calculations to 4 decimal places, e.g. 1.2514 and final answer to 2
decimal places, e.g. 15.25.)
| Value of a call option is $ |
Homework Answers
Value of call
option=((1+1.5%-36/40)/(48/40-36/40)*MAX(48-40,0))/(1+1.5%)
=3.0213465
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