The current stock price is $50. The stock price can go up by 10% or go down by 10% in each month for 3 months. The risk-free interest rate is 12%. What will be the price of 3- months European Put option using 3-Step Binominal option pricing model if the strike price of the option is $55? Answer choices: a. $2.34 b. $8.91 c. $5.24 d. $5.00

The current stock price is $50. The stock price can go up by 10% or go down by 10% in each month for 3 months. The risk-free interest rate is 12%. What will be the price of 3- months European Put option using 3-Step Binominal option pricing model if the strike price of the option is $55? Answer choices: a. $2.34 b. $8.91 c. $5.24 d. $5.00

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 4P: Put–Call Parity The current price of a stock is $33, and the annual risk-free rate is 6%. A call...

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Put–Call Parity The current price of a stock is $33, and the annual risk-free rate is 6%. A call option with a strike price of $32 and with 1 year until expiration has a current value of $6.56. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option?
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