Value of an at the money call option
Problem:
Suppose a stock is worth $30 today and in one period will either be worth 10% more or 10% less. The risk free rate is 5%.
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Question: What is the value of an at the money call option?
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Suppose that the price of stock is $40, the continuously compounded interest rate is 8%, and options have 3 months to expiration. A 40- strike European put sells for 1.99. How much a 40-strike call option should be?
Question: What is the value of an at the money call option? Note: Please provide full description.
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