What is the value of call option

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1. Consider a binomial model. The current value of a stock is $50 and the strike price for a call option is $52. The up factor is equal to 1.15 and the down factor is equal to 0.90. The risk-free rate is 3%. What is the value of the call option?

2. The S&P 500 index currently stands at 2,700 and has a volatility of 11%. The risk-free interest rate is 2% and the dividend yield on the index is 4%.

a) Use Black-Scholes to value a three-month European put option with a strike price of 2,500.

b) Use Black-Scholes to value a one-year European call option with a strike price of 3,000.

Reference no: EM132054834

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