Calculate the price of maturity assuming, Corporate Finance

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a)    Calculate the price of a European style call option with 6 months left to maturity assuming a risk-free rate of 3.5% and a non-dividend paying stock which can change in price by a factor of 1.1 or 0.9 every 3 months.  The current price of the underlying asset is $44 and the option strike price is $42.50

b)    Re-calculate the price of the option in part a assuming that for the second three month period, the price change factors are 1.2 and 0.85.

c)    Calculate the price of an American style put option with one year to maturity assuming a risk-free rate of 2.8% and a non-dividend paying stocks which can change in price by a factor of 1.10 or 0.95 every 6 months.  The current price of the underlying asset is $16 and the option strike price is $17.50.

 

 

 


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