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Calculate the price of a two-year american

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Reference no: EM133057002

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.

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

A. 2.55
B. 5.13
C. 3.91
D. 4.52

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

Group of answer choices

A. 14.86
B. 0
C. 16.22
D. 10.25

Reference no: EM133057002

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