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13.13. What Is The Price of A European Put Option On A Non-Dividend-Paying Stock

This document contains the solutions to two homework problems calculating the price of European put options. Problem 13.13 calculates the put price as $5.06 when the stock price is $52, strike is $50, interest is 12%, volatility is 30%, and time is 3 months. Problem 13.14 calculates the put price as $6.40 when the stock price is $69, strike is $70, interest is 5%, volatility is 35%, and time is 6 months.

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97 views

13.13. What Is The Price of A European Put Option On A Non-Dividend-Paying Stock

This document contains the solutions to two homework problems calculating the price of European put options. Problem 13.13 calculates the put price as $5.06 when the stock price is $52, strike is $50, interest is 12%, volatility is 30%, and time is 3 months. Problem 13.14 calculates the put price as $6.40 when the stock price is $69, strike is $70, interest is 5%, volatility is 35%, and time is 6 months.

Uploaded by

chocolatedoggy12
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Courtney Gilliam

4.5.2017
FIN 433
CRN: 27706
UIN: 00981224
FIN 433 HW (13.13 & 13.14)

13.13. What is the price of a European put option on a non-dividend-paying stock


when the stock price is $52, the strike price is $50, the risk-free interest rate is 12%
per annum, the volatility is 30% per annum, and the time to maturity is three
months?
D1= ln (52/50) + (.12+.32/2).5 / .300.25 = .5365
D2= .5365 - .300.25 = .3865
52*.7042 - 50e-0.03 * .6504 = 5.06

13.14. What is the price of a European put option on a non-dividend-paying stock


when the stock price is $69, the strike price is $70, the risk-free interest rate is 5%
per annum, the volatility is 35% per annum, and the time to maturity is six months?
D1= ln (69/70) + (.05+.352/2).5 / .350.5 = .1666
D2= .1666 - .350.5 = .0809
70e-0.025 * .5323 - 69 * .4338 = 6.40

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