She would like to compute the value of the corresponding put option for Option 1. Which of

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She would like to compute the value of the corresponding put option for Option 1. Which of the following is closest to Ms. Barlow€™s answer?
a. $3.79
b. $3.94
c. $4.41


Rachel Barlow is a recent finance graduate from Columbia University. She has accepted a position at a large investment bank but must first complete an intensive training program. Currently she is spending three months at her firm€™s Derivatives Trading Desk. To prepare for her assignment, Ms. Barlow decides to review her notes on option relationships, concentrating particularly on put-call parity. The data she will be using in her review are provided below. She also decides to assume continuous compounding.

Option 1 Option 2 Stock price $100 $110 Strike price $100 $100 7% Interest rate 7% Dividend yield 0% 0% Time to maturity

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Related Book For  book-img-for-question

Fundamentals of Investments, Valuation and Management

ISBN: 978-1259720697

8th edition

Authors: Bradford Jordan, Thomas Miller, Steve Dolvin

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