Ok, In this case, we do not worry about PV of the future price since it is all considered at the 6month point.
So.... from $30 it can goto Su = 36, Sd=24, Suu=43.2, Sud/Sdu=28.8 and Sdd=19.2
To guarantee $60000, stock price must be $24 since $24*2500=$60,000
There for your strike price on your put option must be K=24.
now the hard part...
we know in the UU UD/DU cases that P=0
only in the DD case Pdd=4.8
you use the RNV formula (if you want details let me know its balls to type out)
to calculate a Pd which will be 2.19
use RNV again to calculate Po=$1 so you need to purchase 2500 puts to protect your investment at a cost of 2500.....so the banks offer is great you take it.
Thanks for the help, you did get me on the right track, RTFQ
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