A stock has a current price of $116. An option on this stock that expires in six months has an exercise price of $115. The stock will pay a dividend of $5 in three months. Assume an annualized volatility of 30% and a continuously compounded risk-free rate of 5% 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.

A stock has a current price of $116. An option on this stock that expires in six months has an exercise price of $115. The stock will pay a dividend of $5 in three months. Assume an annualized volatility of 30% and a continuously compounded risk-free rate of 5% 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.

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 an American Put option with time to expiry of 5 months and a strike price of 82. The current price of the underlying stock is 80. Divide the time to expiry into five 1-month intervals. In each interval, the stock price can either rise by 6, or fall by 6, with unknown probability. The risk-free rate is 4.2% per annum, continuously compounded. What is the value of the option. Please provide necessary calculations.
A stock is currently selling for $30. Over the next two periods, the stock will move up by a factor of 1.13 or down by a factor of 0.82 each period. A call option with a strike price of $29 is available. If the risk-free rate of Interest is 3.2 percent per period, what is the value of the call option? Note: Do not round Intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. Value of the call option 1.55 x
Consider a European call option on a stock with current price $100 and volatility 25%. The stock pays a $1 dividend in 1 month. Assume that the strike price is $100 and the time to expiration is 3 months. The risk free rate is 5%. Calculate the price of the the call option.
A stock is currently priced at $42 and will move up by a factor of 1.23 or down by a factor of .91 each period over each of the next two periods. The risk-free rate of interest is 3 percent. What is the value of a put option with a strike price of $49? (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Value of a put option
The stock of Lead Zeppelin, a metal manufacturer, currently sells for $69 and has an annual standard deviation of 42 percent. The risk- free rate is 3.1 percent. What is the value of a put option with a strike price of $70 and 51 days to expiration? (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of a put option
The current price of a stock is $34, and the annual risk - free rate is 3 %. A call option with a strike price of $32 and with 1 year until expiration has a current value of $5.54. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option? Do not round intermediate calculations. Round your answer to the nearest cent. Please answer fast i give you upvote.
A put option that expires in six months with an exercise price of $65 sells for $4.45. The stock is currently priced at $61, and the risk-free rate is 3.9 percent per year, compounded continuously. What is the price of a call option with the same exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Call price
The current price of a stock is $18. In 1 year, the price will be either $28 or $15. The annual risk-free rate is 3%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. X Open spreadsheet Find the price of a call option on the stock that has a strike price is of $23 and that expires in 1 year. (Hint: Use daily compounding.) Assume 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent. $
A stock is currently selling for $45. Over the next two periods, the stock will move up by a factor of 1.23 or down by a factor of .61 each period. A call option with a strike price of $54 is available. If the risk-free rate of interest is 3.2 percent per period, what is the value of the call option? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of the call option
A stock trades for $45 per share. A call option on that stock has a strike price of $55 and an expiration date twelve months in the future. The volatility of the stock's returns is 44%, and the risk-free rate is 5%. What is the Black and Scholes value of this option? The Black and Scholes value of this call option is $ (Round to the nearest cent.)
A call option is currently selling for $5.00. It has a strike price of $85 and ten months to maturity. A put option with the same strike price sells for $8.10. The risk-free rate is 4.6 percent and the stock will pay a dividend of $2.60 in three months. What is the current stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Use the Black–Scholes formula to value the following options:a. A call option written on a stock selling for $72 per share with a $72 exercise price. The stock's standard deviation is 6% per month. The option matures in three months. The risk-free interest rate is 1.50% per month. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. A put option written on the same stock at the same time, with the same exercise price and expiration date. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Please do not use excel, show work step by step, thank you

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