
Ultimate access to all questions.
Explanation:
For a European put on a non-dividend-paying stock, the lower bound is:
Here:
Compute the present value of the strike:
So the lower bound is:
Therefore, the correct answer is $5.78.
No comments yet.
180.2. What is the lower bound for the price of a three (3)-month European PUT option on a non-dividend-paying stock when the stock price is $24.00, the strike price is $30.00, and the risk-free interest rate is 3.0% per annum?
A
zero (0)
B
$5.11
C
$5.78
D
$6.00