In the below question, you are asked to compare two options with parameters as given. The risk- free interest rate for all cases should be assumed to be 2%. Assume the stocks on which these options are written pay no dividends.

Put T X Standard Deviation Option Price

A .5 50 .20 $5

B .5 50 .20 $8

Which put option must be written on the stock with the lower price?

i. A.

ii. B.

iii. Not enough information.