Sam wants to trade options and is looking at some on Honeywell's stock. Specifically, he sees a European call on Honeywell with a strike price of $100.00 that expires in 87 days. Honeywell's current stock price is $121.43, and it has a standard deviation of 42% per year. The risk-free interest rate is 6.03% per year. They pay no dividends. However, he is interested in buying a put not a call. Estimate the value of a put with the same strike price and expiration date as the call just described. Use a 365-day year. (You must show me how you do this without an Excel-based option pricing model. That is, you must show your work with the formulas and Z-Tables. The value will likely be different than if you just plug into an Excel-based BSOPM).
Sam wants to trade options and is looking at some on Honeywell's stock. Specifically, he sees a European call on Honeywell with a strike price of $100.00 that expires in 87 days. Honeywell's current stock price is $121.43, and it has a standard deviation of 42% per year. The risk-free interest rate is 6.03% per year. They pay no dividends. However, he is interested in buying a put not a call. Estimate the value of a put with the same strike price and expiration date as the call just described. Use a 365-day year. (You must show me how you do this without an Excel-based option pricing model. That is, you must show your work with the formulas and Z-Tables. The value will likely be different than if you just plug into an Excel-based BSOPM).
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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Transcribed Image Text:Sam wants to trade options and is looking at some on Honeywell's stock. Specifically, he sees a European call on
Honeywell with a strike price of $100.00 that expires in 87 days. Honeywell's current stock price is $121.43, and it has
a standard deviation of 42% per year. The risk-free interest rate is 6.03% per year. They pay no dividends. However, he
is interested in buying a put not a call. Estimate the value of a put with the same strike price and expiration date as the
call just described. Use a 365-day year. (You must show me how you do this without an Excel-based option pricing
model. That is, you must show your work with the formulas and Z-Tables. The value will likely be different than if you
just plug into an Excel-based BSOPM).
The price of the put is $
(Round to two decimal places.)
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