Contract size (in number of shares) 100,000 Market value of an ABC Inc. share 32 Exercise price for an ABC Inc. share 29 Time to expiration (in years) 0.25 40% 5% Volatility Risk-free rate Based on the above, compute the value of the call option.

Contract size (in number of shares) 100,000 Market value of an ABC Inc. share 32 Exercise price for an ABC Inc. share 29 Time to expiration (in years) 0.25 40% 5% Volatility Risk-free rate Based on the above, compute the value of the call option.

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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Question

Contract size (in number of shares)
100,000
Market value of an ABC Inc. share
32
Exercise price for an ABC Inc. share
29
Time to expiration (in years)
0.25
Volatility
40%
Risk-free rate
5%
Based on the above, compute the value of the call option.

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