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5 2 The SinglePeriod Binomial Option Pricing Approach Problem 5 7 Binomial Model The current price of a stock is $14 In 6 months the price will be either $19 or $11 The annual risk free rate is

5-2: The Single-Period Binomial Option Pricing Approach Problem

5-7 Binomial Model

The current price of a stock is $14. In 6 months, the price will be either $19 or $11. The annual risk-free rate is 7%. Find the price of a call option on the stock that has a strike price of $12 and that expires in 6 months. (Hint: Use daily compounding.) Round your answer to the nearest cent. Assume a 365-day year. Do not round your intermediate calculations.

Also, please explain the answer.

 

Aug 14 2020 View more View Less

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