Assume a stock price of S(0)= $83.00,r = 0.045,σ = 0.25,and dividend = 0.02.What is the price of a claim that pays S³? Use formula 20.29.

Name: Assume a stock price of S(0)= $83.00,r = 0.045,σ = 0.25,and dividend = 0.02.What is the price of a claim that pays S³? Use formula 20.29.
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Question

Quizplus · Accepted Answer

The formula 20.29 for pricing a claim that pays S³ involves using the risk-neutral valuation approach. Given the parameters, the price of the claim is calculated to be approximately $710,695.

Assume a Stock Price of S(0)= $83