Question 13

The current price of Estelle Corporation stock is $28. Its stock price will either go up by 25% or go down by 25% in one year. The stock pays no dividends. The one-year risk-free interest rate is 5%. Using the binomial model, calculate the price of a one-year put option on Estelle stock with a strike price of $28. The price of a one-year put option on Estelle stock with a strike price of $28 is $ (Round to the nearest cent.)