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Q7: TFS stock is currently trading at $17.25 per share. In 4 months it will either rise by 24.00% or fall by 20.00% with equal probability. A 4 month put option struck at $22.43 is trading at $2.59. The risk free rate is 5.50%. What is the expected profit or loss (at maturity) of the put option? A) $2.41 B) $1.32 C) $2.63 D) $1.87 E) $2.19

Q7: TFS stock is currently trading at $17.25 per share. In 4 months it will either rise by 24.00% or fall by 20.00% with equal probability. A 4 month put option struck at $22.43 is trading at $2.59. The risk free rate is 5.50%. What is the expected profit or loss (at maturity) of the put option? A) $2.41 B) $1.32 C) $2.63 D) $1.87 E) $2.19

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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Q7: TFS stock is eurrently trading at $17.25 per share. In 4 months it will either rise by 24.00% or fall by 20.00% with equal probability. A 4 month put option struck at $22.43 is trading at $2.59. The risk free rate is 5.50%. What is the expected profit or loss (at maturity) of the put option? A) $2.41 B) $1.32 C) $2.63 D) $1.87 E) $2.19
Transcribed Image Text:Q7: TFS stock is eurrently trading at $17.25 per share. In 4 months it will either rise by 24.00% or fall by 20.00% with equal probability. A 4 month put option struck at $22.43 is trading at $2.59. The risk free rate is 5.50%. What is the expected profit or loss (at maturity) of the put option? A) $2.41 B) $1.32 C) $2.63 D) $1.87 E) $2.19
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