Question
The current price of a non-dividend-paying stock is $223. The risk-free rate is 2.4% (continuously compounded). A European put option on the stock has a
The current price of a non-dividend-paying stock is $223. The risk-free rate is 2.4% (continuously compounded).
A European put option on the stock has a strike price of $240, expires in 0.6 years, and costs $44.54.
Inputs
stock price= 233
Exercise price= 240
Expiration (years)= 0.6
St. dev. of returns= 1
Put price=44.54
Risk-free rate0.024
What is the implied volatility?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To calculate the implied volatility of the European put option we can use an option pricing model such as the BlackScholes model and solve for the vol...
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Fundamentals of corporate finance
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
2nd Edition
978-0470933268, 470933267, 470876441, 978-0470876442
