Suppose there is also a 1-year European put option on the same stock as in Question 3 with exercise price $30. The current stock price is also $25 and the stock price, in 1 year, will be either $35 (up by 40%) or $20 (down by 20%). The interest rate is 8%. This stock does not pay dividend. What is the value of the put option? Please use risk neutral probability method and assume discrete discounting.  (2) What is put-call parity in option pricing? What needs to be true in order for put-call parity to hold?

You are attempting to value a put option with an exercise price of $108 and one year to expiration. The underlying stock pays no dividends, its current price is $108, and you believe it has a 50% chance of increasing to $130 and a 50% chance of decreasing to $86. The risk-free rate of interest is 10%. Calculate the value of a put option with exercise price $108. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. X Answer is complete but not entirely correct. Value of a put option $ 107.50

Which of the following is correct? O A. Common stock valuation usually treats the common stock as a perpetuity. OB. The appropriate measure for risk according to the capital asset pricing model is beta. OC. The present value of a $100 perpetuity discounted at 5% is $2,000. OD. The incremental cost is the cost of making a choice defined in terms of the next best alternative that is foregone. OE. Both B and C.

Black-Scholes Model Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $32, (2) strike price is $37, (3) time to expiration is 3 months, (4) annualized risk-free rate is 7%, and (5) variance of stock return is 0.16. Do not round intermediate calculations. Round your answer to the nearest cent.