Assume the following data on a 6-month call option, using 3-month intervals as the time period. K = $70, S = $68.50, r = 6.0%, = .32. What is the highest possible stock price associated with this data and the binomial pricing model?
A) $ 51.26
B) $ 68.50
C) $ 70.59
D) $ 91.21

Question

Quizplus · Accepted Answer

The highest possible stock price in a binomial model is calculated using the formula S * u^n, where u is the up factor. Given the data, the up factor can be derived from the volatility and time period, leading to the highest price being $91.21.

Assume the Following Data on a 6-Month Call Option, Using