Stock of HLL is currently trading in the market at Rs.220. The price of the stock is expected to go up or down by 15% in the first half year and by 5% in the second half year. The return on the Government security being traded in the market for same maturity is 4% p.a. You are required to calculate the value of a one-year American put option on HLL’s stock with strike price of Rs.250

Stock of HLL is currently trading in the market at Rs.220. The price of the stock is expected to go up or down by 15% in the first half year and by 5% in the second half year. The return on the Government security being traded in the market for same maturity is 4% p.a. You are required to calculate the value of a one-year American put option on HLL’s stock with strike price of Rs.250

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 12P

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