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Estimate the value of a new 6 -month European-style average price call option on a nondividend-paying stock. The initial stock price is $\$ 30,$ the strike price is...

Question

Estimate the value of a new 6 -month European-style average price call option on a nondividend-paying stock. The initial stock price is $\$ 30,$ the strike price is $\$ 30,$ the risk-free interest rate is $5 \%,$ and the stock price volatility is $30 \%$.

Estimate the value of a new 6 -month European-style average price call option on a nondividend-paying stock. The initial stock price is $\$ 30,$ the strike price is $\$ 30,$ the risk-free interest rate is $5 \%,$ and the stock price volatility is $30 \%$.



Answers

Average Price $A$ stock investor plots the price per share of
the stocks he owns as a function of time and finds that it can be
approximated by
$$S(t)=40+4 e^{-0.01 t},$$
where $t$ is the time (in years) since the stock was purchased. Find
the average price of the stock over the first six years.


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