Binomial model Stewart Enterprises\' current stock price is $65 per share. Call

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Binomial model

Stewart Enterprises' current stock price is $65 per share. Call options for this stock exist that permit the holder to purchase one share at an exercise price of $50. These options will expire at the end of 1 year, at which time Stewart's stock will be selling at one of two prices, $40 or $70. The risk-free rate is 7%. As an assistant to the firm's treasurer, you have been asked to perform the following tasks to arrive at the value of the firm's call options.

Equalize the range of payoffs for the stock and the option. (Round your answer to two decimal places) The ratio of ending price to ending stock value is_______________.

Explanation / Answer

Binomial model Stewart Enterprises' current stock price is $65 per share. Call

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