Task

In this assignment, you will solve problems on Binomial Option Pricing.

I

Task

In this assignment, you will solve problems on Binomial Option Pricing.

Instructions

Use your textbook to answer the following questions from Chapter 11:

Exercise 9, 10, and 19.

Please, upload xls, xlsx file.

Please, use the full computing power of Excel.

9. You are given the following data about options: S = 60, K = 60, r = 2%, T = 0.5,

D = 0 (dividends). If the American call is trading at a price of $5, what is the minimum

price of the American put?

10. In the preceding question, refine the lower bound on the American put if there is a

dividend to be received after three months of an amount of $2. Assume that the term

structure is flat and the American call with dividends is worth $6

19. An investor buys a call on ABC stock with a strike price of K and writes a put with

the same strike price and maturity. Assuming the options are European and that there

are no dividends expected during the life of the underlying, how much should such a

portfolio cost?