expiration date and an exercise price of $145, with an implied volatility of 20%. The annual risk-free rate is 1%, compounded continuously. Shares and options can only be bought and sold in whole numbers. This problem requires the use of the NOrmal Probability Table. Calculate the price of this 145- call opption using the Black-Scholes-Merton option pricing model (round your final answer on the call option price to two decimal places): C = SO'N(d1) - Xexp(-rcT)N(d2), d1 = ((In(SO'/X)) + ((rc +
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Today is June 4, 2020. Stock X is selling at $150 per share. The stock has a dividend yield of 5% per year. There is a call option with an August 18,2020 expiration date and an exercise price of $145, with an implied volatility of 20%. The annual risk-free rate is 1%, compounded continuously. Shares and options can only be bought and sold in whole numbers.
This problem requires the use of the NOrmal Probability Table.
Calculate the price of this 145- call opption using the Black-Scholes-Merton option pricing model (round your final answer on the call option price to two decimal places): C = SO'N(d1) - Xexp(-rcT)N(d2),
d1 = ((In(SO'/X)) + ((rc + std. dev^2) / 2)) T))
((std. dev(sqrt(T))
d2 = d1 - ( std dev. (sqrt(T)) )
where :
SO' = spot price of the underlying asset at time 0, adjusted for dividend yield
X = exercise price on the call opption
std. dev = annualized std. dev of the continuously compounded (log) return on the underlying asset
rc = continuously compounded risk - free rate
T = time to expiration of the call option
N(d1) = cumulative normal probability on d1
N(d2) = cumulative normal probability on d2
NOTE: Please provide intermediate answers.
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