A non-dividend paying stock is selling for $52.50.The standard deviation of its returns is 45% p.a.The risk free rate is 4% p.a. (a) What is the value of a call with 6 months to expiry and a strike price of $50?Calculate your answer based on this input table.InputsStandard Deviation (annual) 45%Maturity (in years) 0,50Risk-Free Rate (annual) 4%Exercise Price $50,00Dividend Yield (annual) 0Stock Price=$52.50 $52,50 d1 is: 0,375286

To calculate the value of a call option with 6 months to expiry and a strike price of $50, we can…

Answered: A non-dividend paying stock is selling…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Consider the rate of return of stocks ABC and XYZ. Year rABC rXYZ 1 22 % 34 % 2 12 12 3 14 18 4 7 0 5 1 −8 1. If you were equally likely to earn a return of 22%, 12%, 14%, 7%, or 1%, in each year (these are the five annual returns for stock ABC), what would be your expected rate of return? (Do not round intermediate calculations.) 2. What if the five possible outcomes were those of stock XYZ? 3. Given your answers to (d) and (e), which measure of average return, arithmetic or geometric, appears more useful for predicting future performance? A. Arithmetic B. Geometric
Vv.
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A non-dividend paying stock is selling for $52.50.
The standard deviation of its returns is 45% p.a.
The risk free rate is 4% p.a.
(a) What is the value of a call with 6 months to expiry and a strike price of $50?
Calculate your answer based on this input table.
Inputs
Standard Deviation (annual)			45%
Maturity (in years)			0,50
Risk-Free Rate (annual)			4%
Exercise Price			$50,00
Dividend Yield (annual)			0
Stock Price=$52.50			$52,50

d1 is:			0,375286