A stock price is currently $80. At the end of four months it will be either $75 or $85. The risk-free rate is 5% per annum with continuous compounding. What is the value of a four-month European put option with a strike price of $80? Use the risk-neutral valuation to answer the question. (Round your answer to the 4 decimal places)

A stock price is currently $80. At the end of four months it will be either $75 or $85. The risk-free rate is 5% per annum with continuous compounding. What is the value of a four-month European put option with a strike price of $80? Use the risk-neutral valuation to answer the question. (Round your answer to the 4 decimal places)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 7P

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