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Purchase a put option on stock

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ANZ is currently selling for $25 per share, Erin, an analyst, expects prices to either rise or decline by the coming year based on the change in interest rates. Her expectation is that if interest rates increases by 1.5%, the share price would rise by 15%. If interest rates fall by 0.25%, the share price would fall b y 25%. The current interest rate is 4.5%. If she decides to purchase a put option on this stock at an exercise price of $27.5, the fair price to pay is

Reference no: EM131752730

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