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Let S = $70, K = $60, r = 6% (continuously compounded), T = 1, and d = 0. Let u = 1.35, d =

Let S = $70, K = $60, r = 6% (continuously compounded), T = 1, and d = 0. Let u = 1.35, d = 0.65, and n = 1. What are D and B for a European put?

The correct answer is option B, but how?

Answers:

a. D = 0.1829; B = 26.1251

b. D = 0.2959; B = 26.3358

c. D = 0.3273; B = 28.3900

d. D = 0.2409; B = 25.0980

e. D = 0.3119; B = 34.6315

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