The current price of Kinston Corporation stock is $10. In each of the next two years, this stock price can either go up by $3.00 or go down by $2.00. Kinston stock pays no dividends. The one year risk-free interest rate is 5% and will remain constant. Using the binomial pricing model, calculate the price of a two-year call option on Kinston stock with a strike price of $9

The current price of Kinston Corporation stock is $10. In each of the next two years, this stock price can either go up by $3.00 or go down by $2.00. Kinston stock pays no dividends. The one year risk-free interest rate is 5% and will remain constant. Using the binomial pricing model, calculate the price of a two-year call option on Kinston stock with a strike price of $9

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section20.A: The Black-scholes Option Pricing Model

Problem 1P

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