Find the call option premium using the binomial model

Assignment Help Finance Basics
Reference no: EM133110920

Currently, a call option on Bayou stock is available with an exercise price of $100 and an expiration date one year from now. Assume that the price of Bayou Corporation stock today is $100. Furthermore, it is estimated that Bayou stock will be selling for either $70 or $148 in one year. Also, assume that the annual risk-free interest rate on a one-year Treasury bill is 10 percent, continuously compounded. Therefore, the T-bill will pay $100 x e^(0.1), or $110.25. Find the call option premium using the Binomial model. For example, if you find that the call option premium is 12.45 type this number in the box below.

Reference no: EM133110920

Questions Cloud

Calculate the value of the put option at time : A stock follows a binomial process for two periods. At time t=0 the price is $100,and at time t=1 the stock price is either $120 or $90. If the time t=1 price i
Why is the airline industry vulnerable and less profitable : a) If investors fear higher inflation, what possible industries might they choose for investment?
What powers are best exercised by the national government : What powers are best exercised by the national government, and why and how do you think power is best distributed between the state and national governments
Find the call option premium using the binomial model : Find the call option premium using the Binomial model. For example, if you find that the call option premium is 12.45 type this number in the box below.
Find the call option premium using the binomial model : Find the call option premium using the Binomial model. For example, if you find that the call option premium is 12.45 type this number in the box below.
Prepare the payroll general journal entries : Prepare the payroll general journal entries required to reflect these amounts for the pay period February 16 - 28, along with Finelay share of CPP contributions
What is the gross gain or loss : An investor shorts 100 shares of NORTEL at $22 a share and buys a 3-month call with a striking price of $25.00 for $3.00. What is the gross gain or loss if the
What is the discounted payback for project : 1. Suppose a company has proposed a new 4-year project. The project has an initial outlay of $70,000 and has expected cash flows of $20,000 in year 1, $22,000 i
Advantages and disadvantages of karl marxs : Describe, in detail, the advantages and disadvantages of Karl Marx's classless society and When thinking about how to organize this essay, you might want

Reviews

Write a Review

Finance Basics Questions & Answers

  What are the different types of unemployment

What are the different types of unemployment, define and explain impact of unemployment on macroeconomic policy

  Estimate the cash ?ows

Develop a ?ve year proforma and estimate the cash ?ows the property will received under the extreme assumption that the anchor space will remain vacant forever.

  Solving finance related problems

In a statement of cash flow, the term cash includes, The ownership of common stock in a corporation usually carries the following rights:

  Nominal interest rate in australia

Assume that interest rate parity exists. You expect that the one-year nominal interest rate in the U.S. is 7%

  Calculating the current market price

Minneapolis Health System has bonds outstanding that have four years remaining to maturity, a coupon interest rate of 9% paid annually and a $1000 par value.

  Confidence interval estimate of the mean daily income

Construct a 90% confidence interval estimate of the mean daily income this parking garage generates. Show all work.

  Evaluate competing projects for npv profiles

Cooper Electronics uses NPV profiles to visually evaluate competing projects. Key data for the two projects under consideration are given in the following?

  Describe three important conditions

Describe three important conditions you would ensure existed in this plant to improve empowerment among production employees.

  What is the theoretical flow time of the process

Each flow unit spends 10 minutes at process 1. It is then split into 2 parts: part 1 spends 15 minutes at process 2 and part 2 spends 12 minutes at process 3

  At what buy-back price would shareholders be indifferent

Assume that WyoOne Corp. recently moved to its optimal capital structure by issuing $4,000mn additional debt and this move resulted in an increase of $2,500mn.

  Calculate the amount of interest in the first coupon

The bond pays annual coupons and is redeemable for its par value of 1000. Calculate the amount of interest in the first coupon.

  Increase in the value of the company after the loan

According to MM Proposition I with taxes, what would be the increase in the value of the company after the loan?

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