What is the price today of a two-year put option on this stock with a strike price of $32? The maximum error is 0.1. a. 1.52 O b. 2.47 c. 1.82 d. None of these answers e. 2.07

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 6P: Binomial Model The current price of a stock is 20. In 1 year, the price will be either 26 or 16. The...
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Assume that a stock trading for $30 today will be worth either $25 or $35 in two
years. A risk-free asset offers an annualized 3% return (continuously compounded)
over that time period.
• What is the price today of a two-year put option on this stock with a strike price of $32?
The maximum error is 0.1.
O a. 1.52
O b. 2.47
O c. 1.82
O d. None of these answers
O e. 2.07
Transcribed Image Text:Assume that a stock trading for $30 today will be worth either $25 or $35 in two years. A risk-free asset offers an annualized 3% return (continuously compounded) over that time period. • What is the price today of a two-year put option on this stock with a strike price of $32? The maximum error is 0.1. O a. 1.52 O b. 2.47 O c. 1.82 O d. None of these answers O e. 2.07
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