Determine the price of a five-month american put option

Assignment Help Financial Accounting
Reference no: EM132971153

We want to price options using the binomial lattice. The current stock price is 105 and the strike price is 100. Assume that the stock up-trend rate is u=1.1 with probability p=0.4 and the down-trend rate is d=0.9 with probability 1-p=0.6. The annual risk-free rate is r=0.01 (compounded discretely). Assume that the length of a period is one month.

Question 1: Determine the price of a 5-month American put option.

Reference no: EM132971153

Questions Cloud

Determine the net income to be earned : Increase selling price by 6% with no change in units sold. Determine the net income to be earned for each of the given alternative course of action
What impact do assumptions regarding allocation of purchase : What impact do your assumptions regarding the allocation of the purchase price and method of paying for the acquisition (cash versus stock) have on the amount
What are apr and ear : What are APR and EAR? You want to buy a computer. The list price is $1000 but you will get a 15% discount if you pay now. Otherwise, you will be required
Is a value of n that will make new portfolio delta neutral : Is there a value of n that will make this new portfolio delta neutral? If yes find n. (n should be rounded to the closest integer value.)
Determine the price of a five-month american put option : Determine the price of a 5-month American put option. We want to price options using the binomial lattice. The current stock price is 105.
Find the price of a five-month european call option : Find the price of a 5-month European call option. We want to price options using the binomial lattice. The current stock price is 105 and the strike price is 10
Compute the portfolio gamma : Compute the portfolio Gamma. Consider a stock with 42% yearly volatility and a current price of 437.5, moreover, the annual risk-free rate is r=0.0125.
Find the amount that spend first year of retirement : Find the amount that spend first year of retirement. You plan to work (and save) for 35 years, then retire (and spend money from your retirement account)
Compare every revenue and expense item on the profit : What must compare every revenue and expense item on the profit and loss statement with? In analysing a budgets results and ensuring it is effective in providing

Reviews

Write a Review

Financial Accounting Questions & Answers

  Find cost of the inventory using weighted average cost flow

If Cooka Lamps uses a periodic inventory system, the cost of the inventory using the weighted average cost flow assumption at January 31, 2020 is

  Evaluate the three proposals for expansion

On October 1, 2015, Santana Rey launched a computer services company, Business Solutions, that is organized as a proprietorship and provides consulting services, computer system installations, and custom program development. Evaluate the three propos..

  What is the inventory turnover rate show calculations

Your firm has sales of $628,000 and cost of goods sold of $402,000. At the beginning of the year, your inventory was $31,000. At the end of the year, the inventory balance was $33,000. What is the inventory turnover rate? Show calculations.

  On date of the cash distribution janes basis in her efg inc

on date of the cash distribution janes basis in her efg inc. stock was 10000 and joes basis in his efg inc. stock was

  How many years would the company need to have

IRR is 9% compounded annually. How many years would the company need to have the machine to make it worth the investment

  The term gross margin is used in reports prepared using

The term gross margin is used in reports prepared using:

  Give two examples of cash receipts

Give two examples of cash receipts and two examples of cash payments that fit into each of the Operating activities and Investing activitiesclassifications

  What type of pension plan is administered by a trustee

What type of pension plan is administered by a trustee according to a formula for the amount of pension benefits the worker will receive when claimed

  What is the cash interest payment on this bond

The coupon rate is 5%, and the bond is issued at a price of $902,878 to yield 6%. What is the cash interest payment on this bond for the SECOND year of its life

  How much could it deduct in year three

Sporting Goods Inc. bought stock in year one for $10,000. In year three, when the stock was worth $100,000, it donated the stock to a law school. Sporting Goods Inc. has a taxable income of $500,000 in year three. How much could it deduct in year thr..

  Which the inventory write-down that results from application

Which the inventory write-down that results from the application of the lower of cost and net realizable value rule is often hidden in the

  What is the weighted average number of shares outstanding

5,000 shares on April 1, and reacquires 3,000 shares on September 1. What is the weighted average number of shares outstanding for the year?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd