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Basic Question 4 of 9
A stock is worth $60 today. In a year the stock price can rise or fall by 15 percent. The interest rate is 6%. A put option expires in two years and has an exercise price of $60.
Use the two-period binomial model to calculate the put option price.
User Contributed Comments 2
| User | Comment |
|---|---|
| rhardin | I guess we are to assume that this put is a European? |
| Debashree | @rhardin yes seems like that.. |
I just wanted to share the good news that I passed CFA Level I!!! Thank you for your help - I think the online question bank helped cut the clutter and made a positive difference.
Edward Liu
Learning Outcome Statements
calculate the no-arbitrage values of European and American options using a two-period binomial model;
identify an arbitrage opportunity involving options and describe the related arbitrage;
CFA® 2025 Level II Curriculum, Volume 5, Module 32.