What should be the current price

Reference no: EM131923371

Question: A stock's price is $100. Over each of the next two three month periods it is expected to go up by 15% or down by 10%. The risk free rate is 4% p.a. The stock pays a dividend of $1 per quarter. Assume the option expires the day before the second period dividend is paid.

a. What should be the current price of a 6-month European style put option with a strike price of $95?

b. What should be the current price of a 6-month American style put option with a strike price of $95?

c. What should be the current price of a 6-month European style call option with a strike price of $95?

d. What should be the current price of a 6-month American style call option with a strike price of $95?

Reference no: EM131923371

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