SOA Exam FAM Sample Question 100
Study guide: Exam FAM
A non-dividend paying stock has a current price of S. The continuously compounded risk-free interest rate is 2.75%.
The price of the stock over a six-month period follows a binomial model with u = 1.2903 and d = 0.7966. A six-month European put option on the stock with a strike price of (S - 4.50) has a price of 2.482.
Calculate S.
- A) 44.22
- B) 45.72
- C) 46.97
- D) 49.11
- E) 50.24
Answer this question and see the worked solution