(The effect of exercise price on put option value) On May 2015 the stock price of Toyota Motor Corporation (symbol: TM) was $138. Put options on TM expiring on 15 January 2015 with an exercise price of $100 sold for $0.6.

a. Should a put with an exercise price of $100 expiring on the 20 January 2017 sell for more than $0.6? Explain.

b. Look at the following table. Is there an option which is clearly mispriced?

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TM Put Options Expiring 15 Jan 2016 Exercise price Put option price 80 0.20 85 0.60 90 0.34 95 0.45 100 0.60 105 0.63 110 1.09 115 1.52 120 2.00 125 3.55 130 5.32 135 5.50 140 9.35