Consider a perpetual put option with S = $ 37, K = $ 41, r = 4 %, delta(the annualized dividend rate) is 10 %, sigma(the annualized standard deviation of the continously compounded stock returns) is 48 %.
a) What is the price of the perpetual put option $
?
b) At what stock price should the perpetual put option be exercised $
?
You can earn partial credit on this problem.