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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 $122 and a 50% chance of decreasing to $94. The risk-free rate of interest is 5%. 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 $ 6.66

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 $122 and a 50% chance of decreasing to $94. The risk-free rate of interest is 5%. 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 $ 6.66

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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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 $122 and a 50% chance of decreasing to $94. The risk-free rate of interest is 5%. 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 $ 6.66
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 $122 and a 50% chance of decreasing to $94. The risk-free rate of interest is 5%. 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 $ 6.66
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