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European put option using a binomial tree

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Reference no: EM133060816

In answering this question, it may be helpful to use the spreadsheet call.xls (which has been available on moodle for weeks). call.xls gives the Binomial price for a European call option. You will estimate the value of a European put option using a Binomial tree. The following are the key inputs:

-current share price (S0) is $32

-the put option has a strike price of $30

-the riskfree rate of interest is 6% per annum

-the option has 12 months to expiry

-the volatility (sigma) of the underlying stock is 50% per annum.

Using a 8-step Binomial tree, what is the Binomial approximation of the put option value?

Do not enter the dollar sign "tiny_mce_markerquot;. Enter your answer to 2 decimal places.

Reference no: EM133060816

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