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Calculate price of two-year american put option

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Reference no: EM133060607

The current price of LC Corporation stock is $40. In each of the next two years, this stock price can either go up by $15.00 or go down by $15.00. LC stock pays no dividends. The one-year risk-free interest rate is 15% and will remain constant.

A. Using the binomial pricing model, calculate the price of a two-year American put option on LC stock with a strike price of $40.

B. Using the binomial pricing model, calculate the price of a two-year American straddle option on LC stock with a strike price of $40.

Reference no: EM133060607

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