Rebecca is interested in purchasing a European call on a hot new stock, Up, Inc. The call has a strike price of $96.00 and expires in 92 days. The current price of Up stock is $123.65, and the stock has a standard deviation of 39% per year. The risk-free interest rate is 6.42% per year. Up stock pays no dividends. Use a 365-day year. a. Using the Black-Scholes formula, compute the price of the call. b. Use put-call parity to compute the price of the put with the same strike and expiration date. (Note: Make sure to round all intermediate calculations to at least five decimal places.) a. Using the Black-Scholes formula, compute the price of the call. The price of the call is $29.97. (Round t two decimal places.) b. Use put-call parity to compute the price of the put with the same strike and expiration date. The price of the put is $. (Round to two decimal places.)

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
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Rebecca interested in purchasing a European call on a hot new stock, Up, Inc. The call has a strike price of $96.00 and expires in 92 days. The current price of Up stock is $123.65, and the stock has a standard
deviation of 39% per year. The risk-free interest rate is 6.42% per year. Up stock pays no dividends. Use a 365-day year.
a. Using the Black-Scholes formula, compute the price f the call.
b. Use put-call parity to compute the price of the put with the same strike and expiration date.
(Note: Make sure to round all intermediate calculations to at least five decimal places.)
a. Using the Black-Scholes formula, compute the price of the call.
The price of the call is $29.97. (Round to two decimal places.)
b. Use put-call parity to compute the price of the put with the same strike and expiration date.
The price of the put is $. (Round to two decimal places.)
Transcribed Image Text:Rebecca interested in purchasing a European call on a hot new stock, Up, Inc. The call has a strike price of $96.00 and expires in 92 days. The current price of Up stock is $123.65, and the stock has a standard deviation of 39% per year. The risk-free interest rate is 6.42% per year. Up stock pays no dividends. Use a 365-day year. a. Using the Black-Scholes formula, compute the price f the call. b. Use put-call parity to compute the price of the put with the same strike and expiration date. (Note: Make sure to round all intermediate calculations to at least five decimal places.) a. Using the Black-Scholes formula, compute the price of the call. The price of the call is $29.97. (Round to two decimal places.) b. Use put-call parity to compute the price of the put with the same strike and expiration date. The price of the put is $. (Round to two decimal places.)
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