Project #19629 - Finance Derivatives Project

You are trying to price a 30-day call option to purchase a non-dividend paying stock that is currently priced at $30.00.  The strike price on the option is $35.  The standard deviation of the return of the stock is 0.45 and the risk-free rate of return for a 30-day maturity investment is .25%.  Build a 10-step binomial model to price the option.  Next, you will price the option using the Black-Scholes model to check your accuracy.  What is the cost of a put option with the same maturity date and strike price as the call?  Finally, go back to the binomial model and price the option, assuming that it pays a dividend that equates to a 3% dividend yield exactly 15 days from today.

Subject Business
Due By (Pacific Time) 12/11/2013 04:25 am
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