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For a stock, you are given: i) The current stock price is 50 ii) At the end of three months the stock price will either be 45 or 55 iii) The stock pays dividends at the rate proportional to its price. The dividend yield is 4% iv) The continuously compounded risk-free interest rate is 0.03 Consider a 3-month 53-strike European put on the stock. Find A for the put option

For a stock, you are given: i) The current stock price is 50 ii) At the end of three months the stock price will either be 45 or 55 iii) The stock pays dividends at the rate proportional to its price. The dividend yield is 4% iv) The continuously compounded risk-free interest rate is 0.03 Consider a 3-month 53-strike European put on the stock. Find A for the put option

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
Problem 1PS
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d) 0.7920
E)0.9024

For a stock, you are given: i) The current stock price is 50 i) At the end of three months the stock price will either be 45 or 55 iii) The stock pays dividends at the rate proportional to its price. The dividend yield is 4% iv) The continuously compounded risk-free interest rate is 0,03 Consider a 3-month 53-strike European put on the stock. Find A for the put option Posuble Answers A -0.7920 B -0.9024 C 0.1024
Transcribed Image Text:For a stock, you are given: i) The current stock price is 50 i) At the end of three months the stock price will either be 45 or 55 iii) The stock pays dividends at the rate proportional to its price. The dividend yield is 4% iv) The continuously compounded risk-free interest rate is 0,03 Consider a 3-month 53-strike European put on the stock. Find A for the put option Posuble Answers A -0.7920 B -0.9024 C 0.1024
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