A one-year call option with strike $50 trades for $8.50; The current price of the stock is $55, and the risk-free rate is 3%. Calculate the implied volatility. You may use bisection if you wish, but it is also OK simply to try a variety of volatilities between 20% and 25% and choose the best.
A one-year call option with strike $50 trades for $8.50; The current price of the stock is $55, and the risk-free rate is 3%. Calculate the implied volatility. You may use bisection if you wish, but it is also OK simply to try a variety of volatilities between 20% and 25% and choose the best.
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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A one-year call option with strike $50 trades for $8.50; The current price of the stock is $55, and the risk-free rate is 3%. Calculate the implied volatility. You may use bisection if you wish, but it is also OK simply to try a variety of volatilities between 20% and 25% and choose the best.
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