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What is the price of a one-month European put option

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Question 1 - What is the price of a one-month European call option given the following information: the exercise price is $19, the current share price is $19 and the risk-free interest rate is 1% per month. Furthermore, the share price is expected to be either $25 or $15 at the end of the month. The company does not pay dividends. Assume a risk-neutral world.

a) $3.11

b) $1.91

c) $2.49

d) $3.32

e) None of the above answers is correct.

Question 2 - What is the price of a one-month European put option given the following information: the exercise price is $19, the current share price is $19 and the risk-free interest rate is 1% per month. Furthermore, the share price is expected to be either $25 or $15 at the end of the month. The company does not pay dividends. Assume a risk-neutral world.

a) $3.11

b) $1.91

c) $3.45

d) $3.32

e) None of the above answers is correct

Reference no: EM133007103

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