Question

What is a lower bound for the price of a 1-month European put option on a nondividend-paying stock when the stock price is $$\$ 12$$, the strike price is $$\$ 15$$, and the riskfree interest rate is $6 \%$ per annum? 

   What is a lower bound for the price of a 1-month European put option on a nondividend-paying stock when the stock price is $$\$ 12$$, the strike price is $$\$ 15$$, and the riskfree interest rate is $6 \%$ per annum?
Options, Futures, and Other Derivatives
Options, Futures, and Other Derivatives
John C. Hull 10th Edition
Chapter 11, Problem 3 ↓

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The intrinsic value is the difference between the strike price and the stock price. In this case, the intrinsic value is $15 - 12 = \$3$.  Show more…

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What is a lower bound for the price of a 1-month European put option on a nondividend-paying stock when the stock price is $$\$ 12$$, the strike price is $$\$ 15$$, and the riskfree interest rate is $6 \%$ per annum?
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