Consider the following data for a certain stock: Price of the stock now = 50 = Rs.150 Exercise price Rs.140 Standard deviation of continuously compounded annual retur Expiration period of the call option = 3 months Risk-free interest rate per annum = 6 percent (i) What is the value of the call option as per the Black-Scholes model.? Use the normal distribution table and resort to linear interpolation. 0 What s the value of the put option? Consider the following data for a certain stock:Price of the stock now = 50 = Rs.150= E = Rs.140Exercise priceStandard deviation of continuously compounded annual return = s = 0.30Expiration period of the call option = 3 monthsRisk-free interest rate per annum = 6 percent(i) What is the value of the call option as per the Black-Scholes model.? Use the normal distribution table and resort to linear interpolation.(i)What is the value of the put option?

The Black-Scholes model is a popular mathematical model for valuation of the European style of…

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Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter6: Risk And Return

Section: Chapter Questions

Problem 14P

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Consider the following data for a certain stock: Price of the stock now = 50 = Rs.150 Exercise price Rs.140 Standard deviation of continuously compounded annual retur Expiration period of the call option = 3 months Risk-free interest rate per annum = 6 percent (i) What is the value of the call option as per the Black-Scholes model.? Use the normal distribution table and resort to linear interpolation. 0 What s the value of the put option?

Consider the following data for a certain stock:
Price of the stock now = 50 = Rs.150
= E = Rs.140
Exercise price
Standard deviation of continuously compounded annual return = s = 0.30
Expiration period of the call option = 3 months
Risk-free interest rate per annum = 6 percent
(i) What is the value of the call option as per the Black-Scholes model.? Use the normal distribution table and resort to linear interpolation.
(i)
What is the value of the put option?

Features Features Normal distribution is characterized by two parameters, mean (µ) and standard deviation (σ). When graphed, the mean represents the center of the bell curve and the graph is perfectly symmetric about the center. The mean, median, and mode are all equal for a normal distribution. The standard deviation measures the data's spread from the center. The higher the standard deviation, the more the data is spread out and the flatter the bell curve looks. Variance is another commonly used measure of the spread of the distribution and is equal to the square of the standard deviation.

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