The common stock of the P$.$U$.$T$.$T$.$ Corporation has been trading in a narrow price range for the past month, but you

are convinced it is going to break far out of that range in the next six months. You do not know whether it will go up

or down, however. The current price of the stock is $$100$ per share, and the price of a six$-$month call option at an

exercise price of $$100$ is $$10.$

Required:

a$.$ If the semiannual risk$-$free interest rate is $3\%,$ what must be the price of a six$-$month put option on P$.$U$.$T$.$T$.$ stock at

an exercise price of $$100?($The stock pays no dividends.$)$

b$.$ What would be a simple options strategy to exploit your conviction about the stock price's future movements?

How far would it have to move in either direction for you to make a profit on your initial investment?

Complete this question by entering your answers in the tabs below.

Required $A$

If the semiannual risk$-$free interest rate is $3\%,$ what must be the price of a six$-$month put option on P$.$U$.$T$.$T$.$ stock at an

exercise price of $$100?($The stock pays no dividends.$)$

Note: Do not round intermediate calculations. Round your answer to $2$ decimal places.

Price of a six$-$month put option on P$.$U$.$T$.$T$.$ stock

The common stock of the P$.$U$.$T$.$T$.$ Corporation has been trading in a narrow price range for the past month, but you

are convinced it is going to break far out of that range in the next six months. You do not know whether it will go up

or down, however. The current price of the stock is $$100$ per share, and the price of a six$-$month call option at an

exercise price of $$100$ is $$10.$

Required:

a$.$ If the semiannual risk$-$free interest rate is $3\%,$ what must be the price of a six$-$month put option on P$.$U$.$T$.$T$.$ stock at

an exercise price of $$100?($The stock pays no dividends.$)$

b$.$ What would be a simple options strategy to exploit your conviction about the stock price's future movements?

How far would it have to move in either direction for you to make a profit on your initial investment?

Complete this question by entering your answers in the tabs below.

What would be a simple options strategy to exploit your conviction about the stock price's future movements? How far wo

it have to move in either direction for you to make a profit on your initial investment?

Note: Round your intermediate calculations and final answer to $2$ decimal places.