Finance with Dr. John Elder
LE#8

Chapt 11 (Binomial model) # 9,10,12,13.     Try #9 and 10 the longer way -- finding the hedge ratio and solving.  Do 10 (again),12,13 the short way -- using risk-neutral probablities.  For 13, find the value of both the European and American puts.

Answers:
9.   2.23
10. 1.80
12.  1.64
13.  p(euro)=1.38;  P(american)=1.65

Try downloading the derivagem software and see if you can get similar answers (after Tuesday's class).  Note that the software is using particular values for the upward and downward movements in the stock price (u and d) and requires an estimate of the stocks standard deviation to complete these values, so you will get slightly differnet answers.