If the option can be bought or sold at 08 per share devise, Financial Management

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If the option can be bought or sold at 08 per share devise

One-step binomial Tree. Suppose that a stock price is $10 per share at current time and at the end of 3 months the stock price may either move up to $11 or down to $9. Consider a European call option which allows to buy the stocks at $10.5 per share at the end of three months. The risk-free interest rate is 12% per annum. Find the fair price for the option. If the option can be bought or sold at $0.8 per share, devise an investment strategy to show the existence of arbitrage.

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Financial Management: If the option can be bought or sold at 08 per share devise

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Financial Management: If the option can be bought or sold at 08 per share devise

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