Suppose VS's Stock Price Is Currently $20

question 71

Multiple Choice

Suppose VS's stock price is currently $20. In the next six months it will either fall to $10
Or rise to $30. What is the current value of a put option with an exercise price of $15? The six- month risk-free interest rate is 5% (periodic rate) .

• A) $5.00
• B) $2.14
• C) $0.86
• D) $7.86

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Definitions:

Balance Sheet

An overview document showing a business’s assets, liabilities, and the equity of its shareholders on a specific date.

Sole Proprietorship

A business structure where an individual owns and operates the business entirely, bearing unlimited liability for its debts and obligations.

Stockholders' Equity

The owners' claim after subtracting total liabilities from total assets, representing the net value of a company to its shareholders.

Net Income

The residual financial gain of a company after deducting every cost, tax, and expense from the total earnings.