Suppose that the current price of an asset is $100. After three months, there are two possiblevalues for the asset price, and after six months there are three, as follows:S++ = 121s+ = 110So = 100st- = 92S- = 90S-- = 81The annual risk-free rate of interest is 2%. 2.What must be the price of a put option with the same strike price and expiration?(Express in dollars, round-up your answer to 2 decimal places.)

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What must be the price of a put option with the same strike price and expiration?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 4P

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Question

Suppose that the current price of an asset is $100. After three months, there are two possible
values for the asset price, and after six months there are three, as follows:
S++ = 121
s+ = 110
So = 100
st- = 92
S- = 90
S-- = 81
The annual risk-free rate of interest is 2%.

2.
What must be the price of a put option with the same strike price and expiration?
(Express in dollars, round-up your answer to 2 decimal places.)

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