Question
The current price of a non-dividend-paying stock is $37.33 and you expect the stock price to either go up by a factor of 1.196 or
The current price of a non-dividend-paying stock is $37.33 and you expect the stock price to either go up by a factor of 1.196 or down by a factor of 0.836 over the next 0.8 years.
A European put option on the stock expires in 0.8 years. Its strike price is $37. The risk-free rate is 3% (annual, continuously compounded).
What is the value of the option?
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Cases in Finance
Authors: Jim DeMello
3rd edition
1259330476, 1259330478, 9781259352652 , 978-1259330476
