Blanks for the value of european put at each node

Assignment Help Financial Management

Reference no: EM131925811

The current price of ZIP Co. is $20. There is a put option for ZIP Co. with an exercise price of $18. The expiration date on this European option is in two months. The risk-free rate of interest over a month is .002 per month. In order to capture the volatility of ZIP Co., assume that in any month ZIP Co.’s stock price will either rise 20 percent or fall 40 percent.

(a) Write down the possible evolutions of the stock price for ZIP Co. on the binomial tree below.

(b) On the binomial tree below, fill in the blanks for the value of the European put at each node.

Reference no: EM131925811

Questions Cloud

Disturbing the necessary economic laws : The 'new' network economy is, for the larger part of it, intangible. How should any government, which wants to impose rules upon producers

How can a teacher introduce scarcity to children : List five (5) kinds of economic knowledge children should be able to do according to the National Council on Economic Education.

What is the real rate of return for machine : A corporation is considering purchasing a vertical drill machine. What is the real (inflation-free) rate of return for this machine?

Explain how texting while driving can lead to higher gdp : Karina the Economist posted a comment online that stated that texting while driving has led to increases in our GDP.

Blanks for the value of european put at each node : On the binomial tree below, fill in the blanks for the value of the European put at each node.

What internal policy changes or new policies do you feel : What internal policy changes or new policies do you feel will need to be implemented to more effectively address the issue? Be sure to justify your response.

Show the algebra involved : Multiplying this by Q gives its total revenue function TR = 1.6Q -0.004Q2. This skill will be useful in assignment 4. Show the algebra involved.

Weighted average cost of capital-unlevered cost of capital : Discuss the differences between the weighted average cost of capital and the unlevered cost of capital and suggest the appropriate one to be used

Economic status impact use of contraceptives : How might an individual's economic status impact use of contraceptives? How can this issue be addressed with patients

User Account

All Pages