question archive Suppose that Air Jordan's value without the option is $2
Suppose that Air Jordan's value without the option is $2
Subject:FinancePrice: Bought3
Suppose that Air Jordan's value without the option is $2.0b. The value changes over time with a volatility of 47% and the firm can sell its planes anytime during the next three years for $1.75b. The riskless rate is r^∗=1.08. Start with a standard three-step binomial tree and then make the modifications necessary to value the Air Jordan project.
