The stock of Lead Zeppelin, a metal manufacturer, currently sells for $68 and has an annual standard deviation of 41 percent. The risk-free rate is 6 percent. What is the value of a put option with a strike price of $70 and 45 days to expiration?

The stock of Lead Zeppelin, a metal manufacturer, currently sells for $68 and has an annual standard deviation of 41 percent. The risk-free rate is 6 percent. What is the value of a put option with a strike price of $70 and 45 days to expiration?

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 4MC

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

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19. The stock of Lead Zeppelin, a metal manufacturer, currently sells for $68 and has an
annual standard deviation of 41 percent. The risk-free rate is 6 percent. What is the value
of a put option with a strike price of $70 and 45 days to expiration?

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