A non-dividend paying stock has a current price of 80 and has a volatility of 20%....

A non-dividend paying stock has a current price of 80 and has a volatility of 20%. The risk-free rate is 4%. Determine the price of a European put option on the stock with a strike price of 75 and one year to maturity.

Use a two-step binomial tree
Use the Black-Scholes formula

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Expert Solution

ANSWER IN THE IMAGE ((YELLOW HIGHLIGHTED). FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

Standard deviation		20%
Time period (months)		6

*u= e^(Standard deviation)( Time each period/12)**^0.5

u=	1.1519
d=1/u=	0.8681

jeff jeffy answered 1 year ago

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