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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