You are considering buying a three-month put option on Wing and a Prayer Construction stock. The companys
Question:
You are considering buying a three-month put option on Wing and a Prayer Construction stock. The company’s stock currently trades for $10 per share and its price will either rise to $15 or fall to $7 in three months. The risk-free rate for three months is 2 percent. What is the appropriate price for a put option with a strike price of $9?
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.
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If the stock rises to 15 then the option will not be exercised and its payoff ...View the full answer
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Related Book For 
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
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