What is the put option premium given the following information? What would happen to the Put option premium if the risk-free rate significantly declined from its current level? Stock price $28.00 Strike price $35.00 Volatility 50% Dividend Yield 0.00 Time 0.50 Riskfree Rate 3.50%

What is the put option premium given the following information? What would happen to the Put option premium if the risk-free rate significantly declined from its current level? Stock price $28.00 Strike price $35.00 Volatility 50% Dividend Yield 0.00 Time 0.50 Riskfree Rate 3.50%

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 3Q

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Concept explainers

Stock Yields

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the relative stock price. The yield of a stock is usually shown in a percentage that discloses the expected future earnings from stock depending on the current stock price in the future. Stock yield will change depending on the market fluctuations and in accordance with the market fluctuations, the dividends will be increased or decreased by the firm.

Question

What is the put option premium given the following information? What would happen to the Put option premium if the risk-free rate significantly declined from its current level?

Stock price	$28.00
Strike price	$35.00
Volatility	50%
Dividend Yield	0.00
Time	0.50
Riskfree Rate	3.50%

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