amberlynnwallac5724 amberlynnwallac5724

23-12-2022
Business

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consider a one-step binomial tree on stock with a current price of $60 that can go either up to $70 or down to $50 in 1 year. the stock does not pay dividend and interest rates are zero. we want to price the 1-year $65-strike european put option on this tree. (i) what's the put option payoff 1 year later if the stock price ends up at $70? (integer) (ii) what's the payoff if the stock price ends at $50? (integer) (iii) use the tree to compute the value (1 decimal) and delta (2 decimals) of the put option. (iv) what's the risk-neutral probability of the stock price going up to the $70 mode of the tree? (2 decimals) (write all answers in the exact required decimals.)

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