Calculate the value ofthis option using binomial option

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Reference no: EM133372135

Question: Determine whether the following options are in the money, at the money or out of the money. justify your answer. (i) The current market price of the shares ofXYZ Ltd is $34. A call option on this share has a strike price of$33. [ii] The current market price of the shares of PQR Ltd is $55. A put option on this share has a strike price of$54. ll. One month ago, you purchased an American call option with a strike price of $50 for $2.45. The underlying stock is now trading for $53. lfyou exercise the call today, what will be your annualised return? 111. A call option with an exercise price of$100 has a 1 year to expiration. The underlying stock of this option has a current price of$100. You believe that there is a 50% chance of stock price increasing to $120 and a 50% chance ofstock price decreasing to $80 in one year. The risk-free rate ofinterest is 10%. Calculate the value ofthis option using binomial option pricing approach.

Reference no: EM133372135

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