Use black-scholes option pricing model to value put option

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Reference no: EM13928020

You observe the following in relation to a 4-month European put option on the S&P200 index.

a)    Strike price of 3400

b)   The S&P200 Index is currently at a level of 3600

c)    The dividend yield is on the S&P200 Index is 4% p.a compounded quarterly

d)   The risk free interests rate is 5% p.a compounded semi-annually

e)    The volatility of the S&P200 Index is 25% p.a.

REQUIRED:

Use Black-Scholes option pricing model to value the put option. State any assumptions you make.

Take into consideration different compouding. Please do manually and show all the steps

Reference no: EM13928020

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