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luda_lava [24]
3 years ago
11

The current price of a stock is $50, the annual risk-free rate is 6%, and a 1-year call option with a strike price of $55 sells

for $7.20. What is the value of a put option, assuming the same strike price and expiration date as for the call option?
Business
1 answer:
wariber [46]3 years ago
6 0

Answer:

$9.00.

Explanation:

The computation of the value of a put option is shown below:

Data provided in the question

Current price of the stock = $50

Risk free rate = 6%

Strike price = $55

Sale price = $7.20

Based on the above information

The value of put option is

Put = V - P + X exp(-r t)

= $7.20 - $50 + $55 e RF  - 0.06(1)

= $7.20 - $50 + $51.80

= $9.00

Hence, the value of put option is $9

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