Eagletron's current stock price is $10. Suppose that over the current year, the stock price...
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Finance
Eagletron's current stock price is $10. Suppose that over the current year, the stock price will either increase by 96% or decrease by 58%. Also, the risk-free rate is 25% (EAR).
a. What is the value today of a one-year at-the-money European put option on Eagletron stock?
b. What is the value today of a one-year European put option on Eagletron stock with a strike price of $19.60?
c. Suppose the put options in parts (a) and (b) could either be exercised immediately, or in one year. What would their values be in this case?
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