The current price of Estelle Corporation stock is $20.00. In each of the next two years, this stock price will either go up by 21% or go down by 21%. The stock pays no dividends. The one-year risk-free interest rate is 8.3% and will remain constant. Using the Binomial Model, calculate the price of a one-year put option on Estelle stock with a strike price of $20.00. The price of the one-year put option is $ (Round to the nearest cent.)

The current price of Estelle Corporation stock is $20.00. In each of the next two years, this stock price will either go up by 21% or go down by 21%. The stock pays no dividends. The one-year risk-free interest rate is 8.3% and will remain constant. Using the Binomial Model, calculate the price of a one-year put option on Estelle stock with a strike price of $20.00. The price of the one-year put option is $ (Round to the nearest cent.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section20.A: The Black-scholes Option Pricing Model

Problem 1P

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