What is the price of a European put option on a non-dividend paying stock when the stock price is K69, the strike price is K70, the risk-free rate is 5% per annum, the volatility is 35% per annum, and the time to maturity is 6 months?

What is the price of a European put option on a non-dividend paying stock when the stock price is K69, the strike price is K70, the risk-free rate is 5% per annum, the volatility is 35% per annum, and the time to maturity is 6 months?

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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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

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What is the price of a European put option on a non-dividend paying stock when the
stock price is K69, the strike price is K70, the risk-free rate is 5% per annum, the
volatility is 35% per annum, and the time to maturity is 6 months?

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