Using the Black-Scholes Formula,calculate the Price of a Put Option

question 26

Multiple Choice

Using the Black-Scholes formula,calculate the price of a put option from the following information: exercise price $3.00;current share price $3.30;term to expiry three months;standard deviation 0.30 p.a. ;and risk-free interest rate 10% p.a.continuously compounded.

• A)$0.1586
• B)$1.029
• C)$1.9875
• D)$0.0559

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Definitions:

Freud's Theory

A set of psychoanalytic theories proposed by Sigmund Freud that focus on the unconscious mind, developmental stages, and the interplay of ego, superego, and id.

Society

A large group of individuals living together in a more or less ordered community, sharing customs, laws, and organizations.

Operant Conditioning

An educational method that adjusts the intensity of an action by using rewards or penalties.

B.F. Skinner

An American psychologist known for his work in behaviorism and the development of the theory of operant conditioning.