Possible stock prices at the maturity date

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Under a binomial option pricing model, the current stock price of a put is at RM4 in which we expect the price can either go up by 5% percent or down by 3 percent with 60% and 40% probability respectively. The risk-free rate is 2 percent per year. Assume the price changes three times per year. Solve the following questions

(i) What are the possible stock prices at the maturity date?

(ii) What are the possible intrinsic values at the maturity date?

(iii) Calculate the put price.

(iv) Explain what influences your result in (iii)

Reference no: EM133063991

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