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Consider the following data for a certain share.   Current Price                      =   S0       = Rs.  80 Exercise Price                     =  E          = Rs. 90   Standard deviation of continuously compounded annual return  = \sigma  = 0.5 Expiration period of the call option         =     3 months Risk – free interest rate per annum          =    6 percent   a. What is the value of the call option? Use the normal distribution table. b. What is the value of a put option?

Consider the following data for a certain share.   Current Price                      =   S0       = Rs.  80 Exercise Price                     =  E          = Rs. 90   Standard deviation of continuously compounded annual return  = \sigma  = 0.5 Expiration period of the call option         =     3 months Risk – free interest rate per annum          =    6 percent   a. What is the value of the call option? Use the normal distribution table. b. What is the value of a put option?

Essentials Of Investments
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
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Consider the following data for a certain share.

 

Current Price                      =   S0       = Rs.  80

Exercise Price                     =  E          = Rs. 90

 

Standard deviation of continuously compounded annual return  = \sigma  = 0.5

Expiration period of the call option         =     3 months

Risk – free interest rate per annum          =    6 percent

 

a. What is the value of the call option? Use the normal distribution table.

b. What is the value of a put option?

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