Suppose a stock price can go up by 15% or down by 13% over the next year.

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Suppose a stock price can go up by 15% or down by 13% over the next year. You own a one-year put on the stock. The interest rate is 10%, and the current stock price is $60.

a. What exercise price leaves you indifferent between holding the put or exercising it now?

b. How does this break-even exercise price change if the interest rate is increased?

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Principles Of Corporate Finance

ISBN: 9780077398040

10th Edition

Authors: Richard Brealey

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Question Posted: Jul 31, 2024 04:00 AM

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Suppose a stock price can go up by 15% or down by 13% over the next year.

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Principles Of Corporate Finance

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