Tembo holds a one-year put option on Shoprite common stock. The put option can be exercised at K50. Assume that the expiration date has arrived and the premium is K3. What is the value of the Shoprite put option on the expiration date if: Shoprite common stock is selling at K56 per share? Shoprite common stock is selling at K45 per share?
Tembo holds a one-year put option on Shoprite common stock. The put option can be exercised at K50. Assume that the expiration date has arrived and the premium is K3. What is the value of the Shoprite put option on the expiration date if: Shoprite common stock is selling at K56 per share? Shoprite common stock is selling at K45 per share?
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
Tembo holds a one-year put option on Shoprite common stock. The put option can be exercised at K50. Assume that the expiration date has arrived and the premium is K3. What is the value of the Shoprite put option on the expiration date if:
- Shoprite common stock is selling at K56 per share?
- Shoprite common stock is selling at K45 per share?
Expert Solution
Given Information:
Exercise price of put option is K50
Put premium is K3
Time period is 1 years
To Find:
- Value of put option at Stock price K56
- Value of put option at Stock price K45
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Solved in 2 steps
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