Question: A 2-year American put is written on a stock whose current price is $42. You expect that in each year the stock price either goes

  1. A 2-year American put is written on a stock whose current price is $42. You expect that in each year the stock price either goes up by 15% or decreases by 5%. The one-period interest rate is

  2. A put with 1-year to maturity is written on a stock. The current underlying stock price is $20.The options exercise price is $18, the interest rate is 3.74%, and the stocks volatility is 32.7%.The price of a call written on the same stock with the same exercise price and time to maturity is $4.3. Use BSM pricing to determine if put-call parity holds.

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