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6.03% $2,111.00
$1,991.00 0.00% $1,991.00
Call Option 68.842 Call Option 40.222 -5.27% $1,886.00
4.49% $1,886.00
-9.34% $1,805.00
Call Option 0 -3.27% $1,746.00
The amount I would pay today to buy the option to buy the gold at $2000 at the end
of second period
111
111
0
First Period
0
Probability Calcuation 0.0382=P*0.1331+(0.5-P)*(-0.0934)
P of rise 37.62%
P of same 50%
P of fall 12.38%
0.1312 0.580531
0.226
Second Period
P of rise 37.62%
P of same 50%
P of fall 12.38%
Note: Here the probabilities are calculated different for both the periods, as in second period t
fall.I have not considered probability of 'same' as 50% in second period just as I have do
4.49% $1,886.00 0
-9.34% $1,805.00
Call Option 0 -3.27% $1,746.00 0
The amount I would pay today to buy the option to buy the gold at $2000 at the end
of second period
Rate 3.82%
0.1312 0.580530973451327
0.226
First Period
Fall
P for 1886 and (1-P) for 1746
49 * P+ (1-P) * (-0.0327)=0.0382
0.9146
0.0854
0