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 has a 50% chance of increasing to $130 and a 50% chance of decreasing to $86. The risk-fre rate of interest is 10%. Calculate the value of a put option with exercise price $108. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. Value of a put option $ 107.50

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
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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 $130 and a 50% chance of decreasing to $86. The risk-free
rate of interest is 10%. Calculate the value of a put option with exercise price $108.
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
X Answer is complete but not entirely correct.
Value of a put option
$ 107.50
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 $130 and a 50% chance of decreasing to $86. The risk-free rate of interest is 10%. Calculate the value of a put option with exercise price $108. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. X Answer is complete but not entirely correct. Value of a put option $ 107.50
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