What is the price of a european put option

Assignment Help Financial Management

Reference no: EM131015966

Currently a stock is trading at $25/share. A three-month European call option with a strike price of $25 is valued at $1.3214. Assume that the risk-free rate is 2.5% and that the standard deviation of stock returns is 25%. What is the price of a European put option with the same strike price and time to expiration? Do not use the Black-Scholes formula

Reference no: EM131015966

Questions Cloud

What is the familys disposable income : Construct a personal income statement for the Humperdinck family using the following information: salaries, $42,000; mortgage payment, $7,980; food, $2,400; interest income, $150; transportation, $1,200; dividend income, $190; automobile payment, $3,..

Treasury note has a face value : A 3-year treasury note has a face value of $1000 and annual coupon of 8%. The 1-year spot rate is r1 = 2%, and the 1-year forward rates for the next two years are r2 = 4% and r3 = 5%. Compute the price of the T-note. Calculate the 2- and 3-year spot ..

Raise ethical standards in our organizations : Operating a business in an ethical manner takes time, effort and commitment. What are the key elements to a company having successful organizational ethics? What can we do as managers to encourage ethical behavior and to raise ethical standards in ou..

Profit diagram for the straddle mentioned : An investor purchases a call on a stock, with an exercise price of $45 and premium of $3, and a put option with the same maturity that has an exercise price of $45 and premium of $2. Please draw a payoff diagram and a profit diagram for the ‘straddle..

What is the price of a european put option : Currently a stock is trading at $25/share. A three-month European call option with a strike price of $25 is valued at $1.3214. Assume that the risk-free rate is 2.5% and that the standard deviation of stock returns is 25%. What is the price of a Euro..

Used to calculate net sales : Which one of the following is not used to calculate net sales?

What is the bank discount yield-the bond equivalent yield : A Treasury bill with 141 days to maturity is quoted at 97.540. What is the bank discount yield, the bond equivalent yield, and the effective annual return? (Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal ..

Using the declining-balance method : A truck costs $35,000 with a residual value of $2,000. Its service life is five years. Using the declining-balance method at twice the straight-line rate, the book value at the end of year 2 is...

Write out the constant growth model : Write out the constant growth model. Based on the model, explain why a company's stock price will drop if the company cuts dividends?

User Account

All Pages