Suppose a stock is currently trading for $35, and in one period it will either increase to $38 or decrease to $33. If the one-period risk-free rate is 6%, what is the price of a European put option that expires in one perlod and has an exercise price of $35? O $0.51

Suppose a stock is currently trading for $35, and in one period it will either increase to $38 or decrease to $33. If the one-period risk-free rate is 6%, what is the price of a European put option that expires in one perlod and has an exercise price of $35? O $0.51

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 4P: Put–Call Parity The current price of a stock is $33, and the annual risk-free rate is 6%. A call...

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Question

Suppose a stock is currently trading for $35, and in one period it will either increase
to $38 or decrease to $33. If the one-period risk-free rate is 6%, what is the price of
a European put option that expires in one period and has an exercise price of $35?
$0.51
$2.32
$1.55
$3.00
$0.76

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