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Price of the corresponding european call

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Reference no: EM133067893

A stock selling at $150 is expected to pay a dividend of $10 in three months and has a volatility of 20%. Consider call and put options with a 6-month maturity and a $160 strike price. The risk-free rate is 5% per annum continuously compounded. Consider a three-step binomial tree.

(a) Use the binomial tree to price the put option if it is European.

(b) Without using a Binomial tree, what is the price of the corresponding European Call?

Reference no: EM133067893

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