A stock trading at $47 has a volatility of 30 percent. The continuously compounded risk-free rate is 6 percent. A dividend of $1.4 is expected in 4 months, and no other dividends are expected during the next 12 months. Price a European call written on this stock with an exercise price of $50 and a time to maturity of one year.
A stock trading at $47 has a volatility of 30 percent. The continuously compounded risk-free rate is 6 percent. A dividend of $1.4 is expected in 4 months, and no other dividends are expected during the next 12 months. Price a European call written on this stock with an exercise price of $50 and a time to maturity of one year.
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 stock trading at $47 has a volatility of 30 percent. The continuously compounded risk-free rate is 6 percent. A dividend of $1.4 is expected in 4 months, and no other dividends are expected during the next 12 months.
Price a European call written on this stock with an exercise price of $50 and a time to maturity of one year.
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