USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A stock currently trades for $130 per share. Options on the stock are available with a strike price of $125. The options expire in 10 days. The risk-free rate is 3 three over this time period, and the expected volatility is 0.35.
-Refer to Exhibit 16.3. Calculate the price of the put option.
A) $1.086
B) $0.862
C) $6.234
D) $0.623
E) $2.317

Question

Quizplus · Accepted Answer

The correct answer is A because the put option price is $1.086. The put option price is calculated using the Black-Scholes formula, which takes into account the stock price, strike price, time to expiration, risk-free rate, and expected volatility.