What Is the Put Option Premium Given the Following Information

question 73

Multiple Choice

What is the put option premium given the following information?
$\begin{array}{lrr} \text { Stock price } &\$17\\ \text { Strike price } &\$22\\ \text { Volatility } &25\%\\ \text {Dividend Yield } &1.1\%\\ \text { Time (years) } &0\%\\ \text { Risk-free Rate } &.25\\\end{array}$

• A)$3.98
• B)$4.32
• C)$4.59
• D)$4.96
• E)$5.18

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Definitions:

Real Interest Rate

The rate of interest an investor expects to receive after allowing for inflation. It more accurately reflects the real cost of borrowing and the real yield to lenders.

Mortgage-Backed Securities

Financial instruments secured by a pool of mortgage loans that generate income from the mortgage payments.

Financial Crisis

A significant disruption in the flow of funds from lenders to borrowers, often characterized by a sharp decline in asset prices and the insolvency of financial institutions, leading to economic recession.

Interest Rate

The rate at which interest is paid by borrowers for the money that they borrow.