Option valuation-binomial option pricing model

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Reference no: EM131999368

Option Valuation

a) The stock price of Toyota Motor (TM) is $105. The stock price a year from today will either be $130 or $90. The risk-free interest rate is 10%. Using the binomial option pricing model, the value of a call option with a strike price of $110 and an expiration date 1 year from today should be worth

b) The current stock price of NUGT is $64, and the stock does not pay dividends. The risk-free rate of return is 5%. The standard deviation of NUGT stock is 0.20. You are considering purchasing a call option on NUGT with a strike price of $55 that has an expiration date 73 days from today (T = 0.20 Years).

Using the Black-Scholes Model, the call option should be worth _____ today.

Reference no: EM131999368

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