Use the Information for the Question(s)below

question 9

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 risk-neutral probabilities,calculate the price of a two-year put option on Kinston stock with a strike price of $9.

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Definitions:

Lineage Fission

The division or splitting of a lineage or social group into two or more new lineages or groups, often over disputes or for other social reasons.

Descent Group

A social group whose members share a common ancestry; membership is derived through either the maternal or paternal line.

Patrilineal

A social system in which lineage, inheritance, and social identity are primarily traced through the male line.

Matrilineal

Pertaining to a social system in which lineage, inheritance, and social classification are traced through the mother's line rather than the father's.