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Use Excel’s data table feature to construct a Two-Way Data Table to demonstrate the impact of the risk free rate of interest and the volatility on the price of this put option:

Use Excel’s data table feature to construct a Two-Way Data Table to demonstrate the impact of the risk free rate of interest and the volatility on the price of this put option:

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter12: The Cost Of Capital
Section: Chapter Questions
Problem 22P
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4. A stock is selling today for $100. The stock has an annual volatility of 45 percent and the annual risk-free interest rate is 12 percent. A 1 year European put option with an exercise price of $90 is available to an investor

.a.Use Excel’s data table feature to construct a Two-Way Data Table to demonstrate the impact of the risk free rate of interest and the volatility on the price of this put option:

i. Risk Free Rates of 5%, 7%, 9%, 12%, 15% and 18%.

ii. Volatility of 35%, 45%, 55%, and 65%.

b. How is the put option price impacted by varying the risk free rate of interest?

c.How is the put option price impacted by varying the volatility?

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