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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Question
I'm confident I used the proper steps, but unsure of my math for the Put option value - thank you for your help!
![You are attempting to value a put option with an exercise price of $108 and one year to expiration. The underlying stock pays no dividends, its current price is $108, and you believe it has a 50% chance of increasing to $130 and a 50% chance of decreasing to $86. The risk-free rate of interest is 10%. Calculate the value of a put option with exercise price $108. **(Do not round intermediate calculations. Round your answer to 2 decimal places.)**
[Value of a put option]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F36fa9b7c-7a7e-4f6a-8082-880ec2bd230c%2F7f188baf-c8b2-4cde-af7f-30e9db5f8da1%2F2b9y5pp_processed.png&w=3840&q=75)
Transcribed Image Text:You are attempting to value a put option with an exercise price of $108 and one year to expiration. The underlying stock pays no dividends, its current price is $108, and you believe it has a 50% chance of increasing to $130 and a 50% chance of decreasing to $86. The risk-free rate of interest is 10%. Calculate the value of a put option with exercise price $108. **(Do not round intermediate calculations. Round your answer to 2 decimal places.)**
[Value of a put option]
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