**Unformatted text preview: **The strike price is $50 for both the call and the put. Time to expiration for year. The stock price will rise by 40% or fall by 40% over each of the next year. The borrowing and lending rate of interest is 12%. A. What is the risk neutral value of the call at time zero? (show your work) 45=[63q+27(1-q)]/1.12 => q=0.65 1-q=0.35 C=13*0.65/1.12=7.54 B. What is the risk neutral value of the put at time zero? (show your work) C=23*0.35/1.12=7.19...

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- Spring '08
- Yu
- $50, 40%, 12%, $45.00, [email protected]