A put option on a stock expires in 7 months with a strike price of 150....

A put option on a stock expires in 7 months with a strike price of 150. The interest rate is 5 percent and the standard deviation of the stock is 25 percent. Graph the value of this put option as the price of the stock goes from 130 to 170.

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Expert Solution

Solution:

We can calculate the value of put premium using Black scholes model and then we can graph it.

In the given diagram, using Black Scholes model put premium is calculated and graph has been prepared.

jeff jeffy answered 1 year ago

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