Kestrel Company stock is currently selling for $40 per share. Its historical standard annual deviation of returns
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Kestrel Company stock is currently selling for $40 per share. Its historical standard annual deviation of returns is 0.5 in this single-period environment. The one-year Treasury bill rate is currently 5%. Assume that all of the standard Black-Scholes option pricing model assumptions hold.
a. What is the value of a put on this stock if it has an exercise price of $35 and expires in one year?
b. What is the implied probability that the value of the stock will be less than $30 in one year?
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a d 1 06172 d 2 01178 Nd 1 073...View the full answer
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