A stock has a current price of $106. An option on this stock that expires in seven months has an exercise price of $105. The stock will pay a dividend of $4.50 in four months. Assume an annualized volatility of 25% and a continuously compounded risk-free rate of 6% per annum. Use the Black-Sholes-Merton model to price this option. (In all your calculations, round the numbers to 4 decimal places.) 1) Suppose the option is a European put. Calculate the value of the put. $ Answer
A stock has a current price of $106. An option on this stock that expires in seven months has an exercise price of $105. The stock will pay a dividend of $4.50 in four months. Assume an annualized volatility of 25% and a continuously compounded risk-free rate of 6% per annum. Use the Black-Sholes-Merton model to price this option. (In all your calculations, round the numbers to 4 decimal places.) 1) Suppose the option is a European put. Calculate the value of the put. $ Answer
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
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A stock has a current price of $106. An option on this stock that expires in seven months has an exercise price of $105. The stock will pay a dividend of $4.50 in four months. Assume an annualized volatility of 25% and a continuously compounded risk-free rate of 6% per annum. Use the Black-Sholes-Merton model to price this option.
(In all your calculations, round the numbers to 4 decimal places.)
1) Suppose the option is a European put. Calculate the value of the put.
$ Answer
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