Consider call option for an asset

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Reference no: EM131317535

Consider a call option for an asset with the following parameters:

-Current spot price is $50

-Option expires in 12 months

-Each month the asset could increase in value by 3% or decrease in value by inverse

-The risk free rate is 25 basis points per month

S0 = $50, T=12, U=1.03, D=1/1.03, R=1.0025

a. Determine the terminal distribution of the asset price (hint: use binom.dist function in excel)

Reference no: EM131317535

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