Call options with a strike price of $65.00 and an expiration of two months were written when the underlying stock was trading at $66.53. Over the following month, the underlying stock volatility was 30.82% even though the implied volatility remained constant at 49.50%. The continuously compounded risk free rate is 4.20%. The options currently have one month until expiration and the underyling stock is now trading at $72.60. What is the option's current market price? Report your answer without a dollar sign to four decimal places.
Call options with a strike price of $65.00 and an expiration of two months were written when the underlying stock was trading at $66.53. Over the following month, the underlying stock volatility was 30.82% even though the implied volatility remained constant at 49.50%. The continuously compounded risk free rate is 4.20%. The options currently have one month until expiration and the underyling stock is now trading at $72.60. What is the option's current market price? Report your answer without a dollar sign to four decimal places.
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:Call options with a strike price of $65.00 and an expiration of two months were
written when the underlying stock was trading at $66.53. Over the following
month, the underlying stock volatility was 30.82% even though the implied volatility
remained constant at 49.50%. The continuously compounded risk free rate is
4.20%. The options currently have one month until expiration and the underyling
stock is now trading at $72.60. What is the option's current market price?
Report your answer without a dollar sign to four decimal places.
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