A non-dividend paying stock is trading at 20; the exercise price of it's Europeancall is 18The risk-free rate is 6.0% per annum, the volatility is 39.60% per annum, and thematurity is 6-months.What is the value of N(d₂ )--the probability of the option beingexercised?Formula: d₁ = [In S/X + rc T + (0²T)/2] / ( √T)d₂ = d₁ - 0 √T[Caution: answer the value of N(d₂) using Normsdist in Excel, and not just the valueof (d₂)]Question 14[Exactly the same problem as above, Continued]A non-dividend paying stock is trading at 20; the exercise price of it's Europeancall is 18The risk-free rate is 6.0% per annum, the volatility is 39.60% per annum, and thematurity is 6-months.What is the price of this European Call Option?Formula: European co = So N(d₁) - Xe-rcT N(d₂)[Caution: find the value of N(d₁) and N(d₂) using Normsdist in Excel]

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maturity is 6-months. What is the value of N(d₂ )--the probability of the option being exercised? Formula: d₁= [In S/X + rc T + (o²T)/2] / (0 √T) d₂ = d₁ - 0 √T [Caution: answer the value of N(d₂) using Normsdist in Excel, and not just th

maturity is 6-months. What is the value of N(d₂ )--the probability of the option being exercised? Formula: d₁= [In S/X + rc T + (o²T)/2] / (0 √T) d₂ = d₁ - 0 √T [Caution: answer the value of N(d₂) using Normsdist in Excel, and not just th

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

A non-dividend paying stock is trading at 20; the exercise price of it's European
call is 18
The risk-free rate is 6.0% per annum, the volatility is 39.60% per annum, and the
maturity is 6-months.
What is the value of N(d₂ )--the probability of the option being
exercised?
Formula: d₁ = [In S/X + rc T + (0²T)/2] / ( √T)
d₂ = d₁ - 0 √T
[Caution: answer the value of N(d₂) using Normsdist in Excel, and not just the value
of (d₂)]
Question 14
[Exactly the same problem as above, Continued]
A non-dividend paying stock is trading at 20; the exercise price of it's European
call is 18
The risk-free rate is 6.0% per annum, the volatility is 39.60% per annum, and the
maturity is 6-months.
What is the price of this European Call Option?
Formula: European co = So N(d₁) - Xe-rcT N(d₂)
[Caution: find the value of N(d₁) and N(d₂) using Normsdist in Excel]

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