What is the expected return of the put option

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Harbin Manufacturing has 10 million shares outstanding with a current share price of $20.36 per share. In one year, the share price is equally likely to be $28 or $19. The risk-free interest rate is 5%. a. Using the risk-neutral probabilities, what is the value of a one-year call option on Harbin stock with a strike price of $25. b. What is the expected return of the call option? c. Using the risk-neutral probabilities, what is the value of a? one-year put option on Harbin stock with a strike price of $25 d. What is the expected return of the put option?

Reference no: EM131907353

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