A Stock Priced at 50 Can Go Up or Down

question 14

Multiple Choice

A stock priced at 50 can go up or down by 10 percent over two periods.The risk-free rate is 4 percent.Which of the following is the correct price of an American put with an exercise price of 55?

• A)7.88
• B)3.38
• C)4.00
• D)5.00
• E)1.65

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