Which one of the following situations will produce the highest put price, all else constant? Assume the options are all in the money.
A)$30 stock price; 20% standard deviation
B)$30 stock price; 25% standard deviation
C)$35 stock price; 20% standard deviation
D)$35 stock price; 25% standard deviation
E)Insufficient information is provided to answer this question.

Question

Quizplus · Accepted Answer

The price of a put option increases with the volatility of the underlying asset. Among the given options, a $30 stock price with a 25% standard deviation (Option B) represents the highest volatility scenario for an in-the-money put option, leading to the highest put price. Higher volatility increases the probability of the stock price moving below the strike price, thus increasing the value of the put option.

Which One of the Following Situations Will Produce the Highest