2. a. Calculate the price of a four-month European put option on a non- dividend-paying stock with a strike price of $60 when the current stock price is $55, the continuously compounded risk-free interest rate is 10% per annum, and the volatility is 31% per annum. b. Calculate the price of the put option if a dividend of $2.50 is expected in three months.
2. a. Calculate the price of a four-month European put option on a non- dividend-paying stock with a strike price of $60 when the current stock price is $55, the continuously compounded risk-free interest rate is 10% per annum, and the volatility is 31% per annum. b. Calculate the price of the put option if a dividend of $2.50 is expected in three months.
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
Problem 1PS
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![2. a. Calculate the price of a four-month European put option on a non-
dividend-paying stock with a strike price of $60 when the current stock
price is $55, the continuously compounded risk-free interest rate is 10%
per annum, and the volatility is 31% per annum.
b. Calculate the price of the put option if a dividend of $2.50 is expected in
three months.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F203e7d10-8e56-4cfa-a3b0-20143333c6f3%2F3b2aec59-053b-4cef-be04-86f5eccb0bd7%2Fgqwm9op_processed.png&w=3840&q=75)
Transcribed Image Text:2. a. Calculate the price of a four-month European put option on a non-
dividend-paying stock with a strike price of $60 when the current stock
price is $55, the continuously compounded risk-free interest rate is 10%
per annum, and the volatility is 31% per annum.
b. Calculate the price of the put option if a dividend of $2.50 is expected in
three months.
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