What would be the fair price for such a callable stock today

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Question - Stock price is $ 100. The stock is not callable. Puts on this stock (X=$ 110, T=1 year) are worth $ 20; where 'X' is the exercise price and 'T' is the maturity. Risk-free rate is 10% per year. Hypothetically, if this stock was to be callable (X=$ 110, T=1 year) from the investors then what would be the fair price for such a callable stock today?  Note: If such a call feature existed it would allow the company to call the stock on maturity date (one year from today) and the investors would receive no more than $ 110. Such a feature would affect the price that the investors would be willing to pay today.

Reference no: EM132993124

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