4. Consider a European put option on a stock. The stock price is $70, the time...

 

Transcribed Image Text:

4. Consider a European put option on a stock. The stock price is $70, the time to maturity is 8 months, the risk-free rate of interest is 10% per annum, the exercise price is $65, and the volatility is 32%. A dividend of $1 is expected after 3 months and again after 6 months. Use Black-Scholes formula to find the price of the option. 4. Consider a European put option on a stock. The stock price is $70, the time to maturity is 8 months, the risk-free rate of interest is 10% per annum, the exercise price is $65, and the volatility is 32%. A dividend of $1 is expected after 3 months and again after 6 months. Use Black-Scholes formula to find the price of the option.

Answer rating: 100% (QA)

To calculate the price of a European put option on a nondividend paying stock using the BlackScholes ... View the full answer