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(1 point) Suppose that a stock price is currently 57 dollars, and it is known that five months from now, the price will be either 17 percent higher or 17 percent lower. Find the value of a European put option on the stock that expires five months from now, and has a strike price of 54 dollars. Assume that no arbitrage opportunities exist, and a risk-free interest rate of 7 percent. Answer= dollars.

(1 point) Suppose that a stock price is currently 57 dollars, and it is known that five months from now, the price will be either 17 percent higher or 17 percent lower. Find the value of a European put option on the stock that expires five months from now, and has a strike price of 54 dollars. Assume that no arbitrage opportunities exist, and a risk-free interest rate of 7 percent. Answer= dollars.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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(1 point) Suppose that a stock price is currently 57 dollars, and it is known that five months from now, the price will be either 17 percent higher or 17 percent lower. Find the value of a European put option on the stock that expires five months from now, and has a strike price of 54 dollars. Assume that no arbitrage opportunities exist, and a risk-free interest rate of 7 percent. Answer = dollars.
Transcribed Image Text:(1 point) Suppose that a stock price is currently 57 dollars, and it is known that five months from now, the price will be either 17 percent higher or 17 percent lower. Find the value of a European put option on the stock that expires five months from now, and has a strike price of 54 dollars. Assume that no arbitrage opportunities exist, and a risk-free interest rate of 7 percent. Answer = dollars.
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