Assume that you have been given the following information on Purcell Corporation's call options: Inputs Current stock price = $14 Time to maturity of option = 3 months Variance of stock return = 0.15 Strike price of option = $13 Risk-free rate = 7% $ Intermediate Calculations d₁ = 0.56989 d2 = 0.37624 N(d₁) = 0.71562 N(d₂) = 0.64663 According to the Black-Scholes option pricing model, what is the option's value? Do not round intermediate calculations. Round your answer to the nearest cent. Use only the values provided in the problem statement for your calculations.
Assume that you have been given the following information on Purcell Corporation's call options: Inputs Current stock price = $14 Time to maturity of option = 3 months Variance of stock return = 0.15 Strike price of option = $13 Risk-free rate = 7% $ Intermediate Calculations d₁ = 0.56989 d2 = 0.37624 N(d₁) = 0.71562 N(d₂) = 0.64663 According to the Black-Scholes option pricing model, what is the option's value? Do not round intermediate calculations. Round your answer to the nearest cent. Use only the values provided in the problem statement for your calculations.
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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Transcribed Image Text:Assume that you have been given the following information on Purcell Corporation's call options:
Inputs
Current stock price = $14
Time to maturity of option = 3 months
Variance of stock return = 0.15
Strike price of option = $13
Risk-free rate = 7%
$
Intermediate Calculations
d₁ = 0.56989
d2 = 0.37624
N(d₁) = 0.71562
N(d2) = 0.64663
According to the Black-Scholes option pricing model, what is the option's value? Do not round intermediate calculations. Round your answer to the
nearest cent. Use only the values provided in the problem statement for your calculations.
Transcribed Image Text:Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $28, (2) strike price is $34, (3) time to expiration
is 2 months, (4) annualized risk-free rate is 5%, and (5) variance of stock return is 0.36. Do not round intermediate calculations. Round your answer to the nearest
cent.
$
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