What is the risk-neutral value of the call option

Assignment Help Financial Management

Reference no: EM131176787

A stock is currently priced at $43. The stock will either increase or decrease by 20 percent over the next year. There is a call option on the stock with a strike price of $40 and one year until expiration. If the risk-free rate is 2 percent, what is the risk-neutral value of the call option? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Reference no: EM131176787

Questions Cloud

What would be the value of the investment : The treasurer of a major U.S. firm has $21 million to invest for three months. The interest rate in the United States is .21 percent per month. The interest rate in Great Britain is .26 percent per month. The spot exchange rate is £.621, and the thre..

Project plan for a new internal support system : Your company has assigned you to work on a project plan for a new internal support system. This system will be expected to track formal contacts between company software contracting teams, internal management sponsors, and their external clients.

Explain the purpose of business law : Explain the purpose of business law and how judicial system fits into society -- including business. Differentiate the federal court structure from your state's court structure.

How did or will body language impact your perception : Selct which leadership theory most accurately describs your current or futur approach to leadrship. Based on the selected theory, give one (1) example from your personal or professional life when your leadership was effective and one (1) example w..

What is the risk-neutral value of the call option : A stock is currently priced at $43. The stock will either increase or decrease by 20 percent over the next year. There is a call option on the stock with a strike price of $40 and one year until expiration. If the risk-free rate is 2 percent, what is..

Outline the ncu dissertation process : For this task, you will develop a narrative about your topic, outline the NCU dissertation process, and then submit your questions to your faculty member. Your assignment requirements will be met once you have addressed the following:

What is price of call option with the same exercise price : A put option that expires in six months with an exercise price of $50 sells for $4.85. The stock is currently priced at $46, and the risk-free rate is 3.4 percent per year, compounded continuously. What is the price of a call option with the same exe..

Convert the data sets into marketing information : Convert the data sets into marketing information. Identify any trends that exist in the data for the most recent marketing surveys. Recommend marketing strategies based on the marketing information and identified trends.

Responsibility to consult workers in instance : You are considering changing procedures related to organising staff rosters. This is likely to affect the hours employees work. 1. Why it would be a good idea to consult workers in this instance. Provide at least three reasons. 2. Do you have a legal..

User Account

All Pages