Use the following information for the remaining questions.

Assume you are interested in a 6-month put option. Assume that every 3 months, stock can go up by either 10% or come down by 5%. Continuously compounded rate for 3 months = 2%. Current stock price is $60. Exercise price is $59. Estimate the value of European put. Question 21: What is the probability of an up move?

a. .47

b. .53

c. -.47

d. -.53

What is the probability that the stock goes up in the first 3-month period and the second 3-month period?

a. .47

b. .22

c. .28

d. .58

e. .53

The payoff is ______ if the stock goes up twice, is _____ if the stock goes down once and goes down once, and ______ if the stock goes down twice

a. 0.00, 0.00, 4.85

b. 0.00, 3.70, 4.85

c. 11.4, 3.70, 0.00

d. 11.4, 3.70, 4.85

e. None of the above

What is the expected payoff? (Not present value of the expected payoff)

a. 1.36

b. 2.28

c. 10.7

d. 2.57

e. 4.36