Suppose VS's stock price is currently $20. In the next six months it will either fall by 50% or rise by 50%. What is the current value of a put option with an exercise price of $15 and expiration of one year? The six-month risk-free interest rate is 5% (periodic rate). Use the two stage binomial method.
A) $5.00
B) $2.14
C) $7.86
D) $8.23

Question

Quizplus · Accepted Answer

The Answer of Suppose VS's stock price is currently $20. In the next six months it will either fall by 50% or rise by 50%. What is the current value of a put option with an exercise price of $15 and expiration of one year? The six-month risk-free interest rate is 5% (periodic rate). Use the two stage binomial method.
A) $5.00
B) $2.14
C) $7.86
D) $8.23

Suppose VS's Stock Price Is Currently $20