Find the price of the put option

Assignment Help Financial Management

Reference no: EM132039120

Please use binomial option pricing model to find the price of the put option. The put option matures in a year and has exercise price $30. The price of the underlying stock is S30 today. At the end of the year, the stock price could be either $35 or $25. The interest rate on the risk-free asset is 5% per year. (Hint: Use the stock and the risk-free asset to replicate the payoff of the put option.)

Reference no: EM132039120

Questions Cloud

Bank could control their risk exposure to counter party : Describe an example where a bank could control their risk exposure to a counter party or asset class using Securitized instruments such as CDS or MBS.

What is the expected forward exchange rate one year from now : Sandrine Machinery is a Swiss multinational manufacturing company. What is the expected forward exchange rate 1 year from now?

Find the price of put option using simulated stock prices : Please find the price of the put option using the simulated stock prices.

What is pretax cost of debt : Paget, Inc., has a target debt equity ratio of 1.60. Its WACC is 7.8 percent, and the tax rate is 40 percent. what is its pretax cost of debt?

Find the price of the put option : Please use binomial option pricing model to find the price of the put option.

How would the investor hedge the put option position : An investor buys a put option with a strike price of $72. How would the investor hedge the put option position?

What is its operating ROA : A firm has an ROE of 3%, a debt/equity ratio of 0.3, a tax rate of 40%, and pays an interest rate of 5% on its debt. What is its operating ROA?

Personal finance for family five years prior to retirement : The most important areas of personal finance for a family five years prior to their retirement.

Weighted average cost of capital : Given its tax rate of 40 percent, what is XYZ's weighted average cost of capital?

User Account

All Pages