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Kumon Co. stock price is expected to go up by 20% or down by 15% over...

Kumon Co. stock price is expected to go up by 20% or down by 15% over the next year. You own a one-year put option on the stock. The interest rate is 12%, and current stock price of Kumon is $75. What exercise price leaves you indifferent between holding the put and exercise it now?

A.

$77.907
B.

$27.342
C.

$88.437
D.

$121.332
E.

$62.349
F.

$14.452
G.

$49.508
H.

$34.521
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Answer #1

ANSWER IN THE IMAGE ((YELLOW HIGHLIGHTED). FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

The strike price needs to below down move price (see image), as this is a put option, to have an indifference between holding the put and exercise.

Ans: F. 14.452

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