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What is the value of the tesla call

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Reference no: EM133000252

Tesla stock price is $160 and could halve or double in each six month period (equivalent to a standard deviation of 98%). A one-year call option on Tesla has an exercise price of $120. The interest rate is 3.5% a year.

a. What is the value of the Tesla's call?

b. Suppose that you have an option that allows you to sell Tesla stock in month 6 for $120 or to buy it in month 12 for $120. What is the value of this option?

Reference no: EM133000252

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