Suppose XYZ Corporation's stock price rises or falls with equal probability by $25 each month, starting where it ended the previous month. What is the value of a three month at the-money European call option on XYZ's stock if the stock is priced at $100 when the option is purchased?

Suppose XYZ Corporation's stock price rises or falls with equal probability by $25 each month, starting where it ended the previous month. What is the value of a three month at the-money European call option on XYZ's stock if the stock is priced at $100 when the option is purchased?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter31: Capital Markets

Section: Chapter Questions

Problem 2E

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