When the non-dividend paying stock price is $20,the strike price is $20,the risk-free rate is 6%,the volatility is 20% and the time to maturity is 3 months which of the following is the price of a European put option on the stock

Question

Quizplus · Accepted Answer

The price of a European put option can be calculated using the Black-Scholes formula for put options: $ P = Xe^{-rT}N(-d2) - S_0N(-d1) $. Here, $ S_0 = 20 $, $ X = 20 $, $ r = 0.06 $, $ T = 0.25 $, and the volatility is 0.20. The correct expression is 19.7N(-0.1)-20N(-0.2), which matches option A.

When the Non-Dividend Paying Stock Price Is $20,the Strike Price