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# options 4 - \$13.35 13 Assume that you have a call option...

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Old Exam Problems - Options Page 4 of 5 Pages 11. Assume that a stock is currently selling for \$50. The stock price could go up by 10% (u = 1.10) or fall by 20% (d = 0.80) each month. The monthly interest rate is 1% (periodic rate). Using the binomial model, calculate the price of a call option on the stock with an exercise price of \$40 and a maturity of one month. A. \$14.62 B. \$11.49 C. \$10.40 D. \$12.76 E. \$13.35 12. Assume that a stock is currently selling for \$50. The stock price could go up by 10% (u = 1.10) or fall by 20% (d = 0.80) each month. The monthly interest rate is 1% (periodic rate). Using the binomial model, calculate the price of a call option on the stock with an exercise price of \$40 and a maturity of two months. A. \$14.62 B. \$11.49 C. \$10.40 D. \$12.76 E.
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Unformatted text preview: \$13.35 13. Assume that you have a call option with a strike (exercise) price of \$35, a current stock price of \$38, 146 days until expiration, and an annualized standard deviation of 48.00%. Assuming a risk-free rate of 4.00 percent, calculate the price of an equivalent put option (same parameters). (Take all preliminary numbers out to 9 decimal places.) A. \$1.84 B. \$2.20 C. \$2.91 D. \$1.65 E. \$3.27 14. Assume that a stock is currently selling for \$80. The stock price could go up by 30% (u = 1.30) or fall by 20% (d = 0.80) each period. The periodic interest rate is 1% (1% each period). Using the binomial model, calculate the price of a call option on the stock with an exercise price of \$75 and a maturity of two periods. A. \$15.09 B. \$13.75 C. \$16.48 D. \$14.33 E. \$15.84...
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