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20.7. [2-S01:30] A stock price can go up by 20% or down by 15% over the next year. The current stock price is greater than
20.7. [2-S01:30] A stock price can go up by 20% or down by 15% over the next year. The current stock price is greater than 70. You own a one-year put on the stock. The put has an exercise price of 78.26. The effective annual risk-free interest rate is 11.25%. The stock pays no dividends. If the put is exercised today, the amount received will be X. The price of the put today (unexercised) is also X Calculate the current stock price. (A) 74.50 (B) 75.00 (C) 76.50 (D) 78.00 (E) 78.25
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