Use the Information for the Question(s)below

question 6

Essay

Use the information for the question(s)below.
The current price of Kinston Corporation stock is $10.In each of the next two years,this stock price can either go up by $3.00 or go down by $2.00.Kinston stock pays no dividends.The one-year risk-free interest rate is 5% and will remain constant.
-Using the binomial pricing model,calculate the price of a two-year put option on Kinston stock with a strike price of $9.

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Definitions:

Marginal Product Capital

This refers to the additional output produced as a result of using one more unit of capital, holding other inputs constant.

Maximum Profit Equilibrium

The point at which a firm achieves its highest level of profit given its production and cost constraints.

Price Labor

The cost associated with hiring workers or the wage that employers pay to their employees for their labor.

ATMs

Automated Teller Machines, devices that allow bank customers to perform financial transactions without the need for a branch representative.