American put option on a non-dividend-paying stock

Assignment Help Financial Management

Reference no: EM131536994

Consider a 7-month $135 American put option on a non-dividend-paying stock. Currently, the stock price is $120 and its volatility is 30%. The risk-free rate is 6% per annum. Price the put using a 10-step binomial trees.

Reference no: EM131536994

Questions Cloud

Stock is expected to pay constant dividend in perpetuity : Assume the stock is expected to pay a constant dividend in perpetuity.

Differentiate between pure and speculative risk : Define the term “persons insured” under the homeowner’s program. Differentiate between Pure and speculative risk?

Evaluate average-risk projects : Virus Stopper Inc., a supplier of computer safeguard systems, uses a cost of capital of 9 percent to evaluate average-risk projects,

What is the price volatility of this bond : Follow Bank has a $1 million position in a five-year, zero-coupon bond with a face value of $1, 402, 552. What is the price volatility of this bond?

American put option on a non-dividend-paying stock : Consider a 7-month $135 American put option on a non-dividend-paying stock.

What is the required rate of return in this new issue : What is the required rate of return in this new issue?

Adjustments you will make for interest rate and inflation : How would you handle the shortfalls of working capital based on the adjustments you will make for the interest rate and inflation?

What is the yield to call for this bond : What is the yield to call (YTC) for this bond if the current price is 106 percent of par value?

What is company free cash flow for year one of this project : A firm is considering the purchase of a machine which would represent an investment of $31 million, What is company’s free cash flow for year 1 of this project?

User Account

All Pages