Audrey is considering an investment in Morgan Communications, whose stock currently sells for $65. A put option on Morgan's stock, with an exercise price of $56, has a market value of $4.38. Meanwhile, a call option on the stock with the same exercise price and time to maturity has a market value of $9.81. The market believes that at the expiration of the options the stock price will be either $70 or $50, with equal probability. What is the premium associated with the put option? Round your answer to two decimal places
Audrey is considering an investment in Morgan Communications, whose stock currently sells for $65. A put option on Morgan's stock, with an exercise price of $56, has a market value of $4.38. Meanwhile, a call option on the stock with the same exercise price and time to maturity has a market value of $9.81. The market believes that at the expiration of the options the stock price will be either $70 or $50, with equal probability. What is the premium associated with the put option? Round your answer to two decimal places
Related questions
| A call option with an exercise price of $65 and three months to expiration has a price of $4.20. The stock is currently priced at $64.80, and the risk-free rate is 4 percent per year, compounded continuously. What is the price of a put option with the same exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| Put option price |
