The current price of Natasha Corporation stock is $5.68. In each of the next two years, this stock price can either go up by $2.50 or go down by $2.00. The stock pays no dividends. The one-year risk-free interest rate is 3.8% and will remain constant. Using the Binomial Model, calculate the price of a two-year put option on Natasha stock with a strike price of $7.00. The price of the two-year put is $ (Round to the nearest cent.)
The current price of Natasha Corporation stock is $5.68. In each of the next two years, this stock price can either go up by $2.50 or go down by $2.00. The stock pays no dividends. The one-year risk-free interest rate is 3.8% and will remain constant. Using the Binomial Model, calculate the price of a two-year put option on Natasha stock with a strike price of $7.00. The price of the two-year put is $ (Round to the nearest cent.)
Chapter20: Financing With Derivatives
Section20.A: The Black-scholes Option Pricing Model
Problem 1P
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![The current price of Natasha Corporation stock is $5.68. In each of the next two years, this stock price can either go
up by $2.50 or go down by $2.00. The stock pays no dividends. The one-year risk-free interest rate is 3.8% and will
remain constant. Using the Binomial Model, calculate the price of a two-year put option on Natasha stock with a strike
price of $7.00.
The price of the two-year put is $
(Round to the nearest cent.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa3905acb-cb0d-4b73-ab8e-d80c27e4ae5f%2F766d3037-293b-45b3-8c89-d438f02e41f1%2Fmy19q0p_processed.png&w=3840&q=75)
Transcribed Image Text:The current price of Natasha Corporation stock is $5.68. In each of the next two years, this stock price can either go
up by $2.50 or go down by $2.00. The stock pays no dividends. The one-year risk-free interest rate is 3.8% and will
remain constant. Using the Binomial Model, calculate the price of a two-year put option on Natasha stock with a strike
price of $7.00.
The price of the two-year put is $
(Round to the nearest cent.)
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