Suppose the price per share of Dans stock today is $30 and it is known that the price in three months will be either $20 or $35. If the strike price on a call option for one share of this stock is $28, the call option expires in three months, and the risk-free interest rate is 5%, determine the following based on the single-period binomial model. consider an investor Lisa who owns 300 shares. Determine the profit/loss (in today’s dollars) that Lisa will experience in three months’ time if
(a) Lisa simply holds onto her shares.
(b) Lisa buys a put option on her 300 shares, (one which expires in three months and has strike price 28 · 300 = 8400 dollars).