URGENT Hi I need help with the following problem: Suppose you are attempting to

Question

URGENT Hi I need help with the following problem:

Suppose you are attempting to value a 1-year maturity option on a stock with volatility (i.e.,annualized standard deviation) of 0.30.

What would be the appropriate values for u and d if your binomial model is set up using: (Do not round intermediate calculations. Round your answers to 4 decimal places.)

Thank you

Suppose you are attempting to value a 1-year maturity option on a stock with volatility (i.e.,annualized standard deviation) of 0.30.

Explanation / Answer

a

u=e^(0.3*sqrt(1))=1.349859

d=e^(-0.3*sqrt(1))=0.740818

b

u=e^(0.3*sqrt(0.25))=1.161834

d=e^(-0.3*sqrt(0.25))=0.860708

c

u=e^(0.3*sqrt(1/12))=1.090463

d=e^(-0.3*sqrt(1/12))=0.917042

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