A 524 4 b 725 4 c 275 5 d 476 5 answer a 20

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Unformatted text preview: n price? A) 2.10 $ B) 2.86 $ C) 3.91 $ D) 4.25 $ Answer: C 17) hich number of binomial periods is most likely to produce the most accurate price? W A) 1 B) 2 C) 3 D) 4 Answer: D 3 18) ssume the following data on a 6-month call option, using 3-month intervals as the time A period. K = $50, S = $48, r = 4.0%, = .27. What is the highest expected stock price after 3 months according to the binomial model? A) 48.00 $ B) 50.00 $ C) 55.56 $ D) 59.27 $ Answer: D 19) ssume the following data on a 6-month call option, using 3-month intervals as the time A period. K = $50, S = $48, r = 4.0%, = .27. What is the risk neutral probability of an up move in the stock price? A) 5.24 % 4 B) 7.25 % 4 C) 2.75 % 5 D) 4.76 % 5 Answer: A 20) or a specific futures option, given d = .813 and u = 1.367, what is the risk neutral probability F of an up move in the price of the option? A) 1.87 % 4 B) 3.54 % 4 C) 7.98 % 4 D) 6.46 % 5 Answer: B 10.2 Short Answer Essay Questions 1) raw the binomial tree listing only the option prices at each n...
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