
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question
A 198.

Transcribed Image Text: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 $122 and a 50% chance of decreasing to $94.
The risk-free rate of interest is 5%. Calculate the value of a put option with exercise price $108. (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
Value of a put option
$
6.66
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