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European call option-what should be the value of derivative

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Reference no: EM131928605

Consider a European call option on a non-dividend-paying stock. The current stock price is $53, the option strike price is $50, the risk-free interest rate is 10% per annum, the volatility is 36% per annum, and the time to maturity is three months. A. In a risk-neutral world, what is the probability that a European call option will be exercised? B. What should be the value of a derivative that pays off $15 if the stock price in 3 months exceeds $50?

Reference no: EM131928605

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