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Business, 14.12.2021 05:30 annemcnair217

Let’s walk through how we would price a put in a two-state pricing model. Suppose the current price of the stock is $83. The stock pays no dividends and will be worth $90 if the economy booms and $80 if the economy stalls one year from now. Suppose also that the risk-free rate is 3% per year. (6a) Suppose we have a (European) put with time to expiration of 1 year, and a strike price of $85. What is the price of this put option?

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