Plot the value of a two year European put option with a strike price of $20 on World Wide Plants as a function of the stock price Recall that World Wide Plants has a constant dividend yield of 5 per year and that its volatility is 20 per year The two year risk free rate of interest is 4 Explain why there is a region where the option trades for less than its intrinsic value

Question: Plot the value of a two-year European put option with a strike price of $20 on World Wide Plants as a function of the stock

Plot the value of a two-year European put option with a of $20 on World Wide Plants as a function of the stock price. Recall that World Wide Plants has a constant yield of 5% per year and that its volatility is 20% per year. The two-year risk-free rate of interest is 4%. Explain why there is a region where the option trades for less than its intrinsic value.

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