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Calculate the price of a 2- month call option

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Reference no: EM133001420

The price of IBA stock is $106. It will either increase $10.4 or decrease $8.4 at the end of month 1. If the price is up in the ?rst month, it will either increase $16.7 or decrease $20.2 at the end of month 2. If the price is down in the ?rst month, it will either increase $14.2 or decrease $12 at the end of month 2. The risk-free interest rate is 2% per month. A. Using the replicating portfolio approach, calculate the price of a 2- month call option with a strike price of $100. B. What is the price of a 2-month put option with a strike price of $100?

Reference no: EM133001420

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