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Problem 8-6 "TUTOR WILL YOU PLEASE PLACE ANSWER ON...

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Problem 8-6 "TUTOR WILL YOU PLEASE PLACE ANSWER ON A EXCEL SPREADSHEET, THANK YOU Binomial Model The current price of a stock is $19. In 1 year, the price will be either $26 or $16. The annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price is of $23 and that expires in 1 year. (Hint: Use daily compounding.) Round your answer to the nearest cent. Assume 365-day year. $,Dear Tutor when i opened this attachment there is nothing on the document please resubmit in correct format thank you,Dear Tutor, here is the problem that I was hopeing to be solved,( The current price of a stock is $19. In 1 year, the price will be either $26 or $16. The annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price is of $23 and that expires in 1 year. (Hint: Use daily compounding.) Round your answer to the nearest cent. Assume 365-day year.) I found a problem that is almost identical but a couple of the numbers are different but the formula works, here is the problem I found(The current price of a stock is $20. In 1 year, the price will be either $26 or $16. The annual risk -free rate is 5%. Find the price of a call option on the stock that has a strike price of $21 and that expires in 1 year. (Hint: Use daily compounding.) Tutor if you notice that the difference is in the "current price of a stock is $20 and where in my problem is $19 and the second difference is the strike price there's is $21 where my problem is $23. Below is the calculation Let the call price be C0 The holder of the call will either make a $5 gain or his option will expire worthless. He now has the choice between selling his option and gain C0 dollars, or wait one year and risk a variable profit. If the call holder sells the stocks today, his portfolio is worth C0-20n and in 1 year it will be either 5-26n or 0-16n. By putting n=1/2 he can eliminate his risk. Regardless of what the stock does, his portfolio will be worth -$8. Such a no-risk portfolio gains by definition the no-risk rate of 5%. The discounted value is therefore worth today C0-20/2 = 8/(1+5%) We find that C0=10-8/1.05= $2.38 Solution = $2.38 Tutor would it be possible to use the formula or calculation and solve this problem for me? Thank you

 

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