Calculate the present value of this investment

Reference no: EM13946030

1. OilCo shares are currently trading at $55. The share price is expected to either increase by 6.5% or decrease by 4% by the end of 90 days. Given that the risk-free rate is 3.5%, apply binomial model to calculate the value of the 180-day put option with a strike price of $54/share. Assume 360 days per year.

2. Your banker visits you and tells you of an investment that pays you $150 at the beginning of every 3 months for the next 3 years and $2,000 at the end of 3 years. Suppose the current interest rate is 2% p.a. compounded quarterly. Apply the principle of time value of money to calculate the present value of this investment.

Reference no: EM13946030

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