hard · Principles of Finance time-value-of-money
Consider a 1-year European call option with a strike price of 105 on a stock currently trading at 100. In one year, the stock will be either 125 or 85. The risk-free rate is 5% (compounded annually).
Using the binomial model, what is the current value of the call option?
- $10.00
- $20.00
- $9.52
- $7.14
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