An investor holds 100,000 shares in Mashimoni Ltd and is confidently buying some put options to hedge
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Question:
An investor holds 100,000 shares in Mashimoni Ltd and is confidently buying some put options to hedge her investments. The company's share price is currently Shs. 60. The risk free rate is currently 15% and recent volatility of the company's share price is 25%.The investor requires European put options with an exercise price of Shares. 75 in 3 years
Required: Using the Black holes model determine the amount which the investor is likely to pay for 100,000 put options given the investors specifications.
Related Book For
Financial Accounting Tools for Business Decision Making
ISBN: 978-1119368458
7th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine
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