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
Please do not provide answer in image formate, thank you.
Transcribed Image Text:A put option will mature in six months. The standard deviation of the underlying
stock returns is 50% per year. The exercise price of the put option is $50 and the
stock price is also $50. The risk-free interest rate is 3% per year. Using the Black-
Scholes formula, what is the price of the put option? Show detailed work leading to
your answer in the working sheet.
$6.34
$7.08
$8.07
$3.64
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