User Account

All Pages

Find the call option premium using the binomial model

Assignment Help Finance Basics
Reference no: EM133110921

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: EM133110921

Questions Cloud

Decide vehicle insurance coverages and rates : What personal and state factors are used to decide vehicle insurance coverages and rates?
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

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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