A stock is trading at 100. Consider a two-period binomial model in which the stock price moves up or down each period by factors $u = 1.20$ and $d = 0.80$ , respectively. Suppose the gross risk-free rate of interest per time-step is 1.04. In this setting, the price of a two-period cash-or-nothing binary put option with a strike of 100 that pays $100 if it finishes in-the-money is
A) $36.
B) $33.28
C) $64.
D) $59.17.

Question

Quizplus · Accepted Answer

The Answer of A stock is trading at 100. Consider a two-period binomial model in which the stock price moves up or down each period by factors $u = 1.20$ and $d = 0.80$ , respectively. Suppose the gross risk-free rate of interest per time-step is 1.04. In this setting, the price of a two-period cash-or-nothing binary put option with a strike of 100 that pays $100 if it finishes in-the-money is
A) $36.
B) $33.28
C) $64.
D) $59.17.

A Stock Is Trading at 100 u=1.20u = 1.20u=1.20 And d=0.80d = 0.80d=0.80

A Stock Is Trading at 100 $u = 1.20$ And $d = 0.80$