Consider a European call option on the S&P 500 that is two months from maturity. The current value of the index is 930, the exercise price is 900, the risk-free interest rate is 8% per annum, and the volatility of the index is 20% per annum. Dividend yields of 0.2% and 0.3% are expected in the first month and the second month, respectively. Calculate the call price
Consider a European call option on the S&P 500 that is two months from maturity. The current value of the index is 930, the exercise price is 900, the risk-free interest rate is 8% per annum, and the volatility of the index is 20% per annum. Dividend yields of 0.2% and 0.3% are expected in the first month and the second month, respectively. Calculate the call price
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 a European call option on the S&P 500 that is two months from maturity. The current
value of the index is 930, the exercise price is 900, the risk-free interest rate is 8% per annum,
and the volatility of the index is 20% per annum. Dividend yields of 0.2% and 0.3% are expected
in the first month and the second month, respectively. Calculate the call price
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