The Black Hole Inc. has a call option written on its common stock shares. Here's what's known: The Black Hole Inc.'s today's stock price, per share ($) 130 Current annual risk-free rate 4% Time until the option's expiration, in years 0.76 Standard deviation of The Black Hole Inc.'s annual stock returns 0.75 Strike price of The Black Hole Inc's call option ($) 150 According to the Black-Scholes formula, today's value of this call option is [Select] . As part of your calculations, d1 equals [Select] places in all intermediate steps BY A LOT! Let's say, the number you got using the Black-Scholes formula is less than the amount that Google.finance.com shows this call option can be purchased for today. This means that this call option is [Select] and N(d2) equals [Select] . Increase decimal
Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
![The Black Hole Inc. has a call option written on its common stock shares. Here's
what's known:
The Black Hole Inc.'s today's stock price, per share ($)
Current annual risk-free rate
130
4%
Time until the option's expiration, in years
0.76
Standard deviation of The Black Hole Inc.'s annual stock returns 0.75
Strike price of The Black Hole Inc.'s call option ($)
150
According to the Black-Scholes formula, today's value of this call option is
[Select]
. As part of your calculations, d1 equals
[Select]
places in all intermediate steps BY A LOT!
Let's say, the number you got using the Black-Scholes formula is less than the amount that
Google.finance.com shows this call option can be purchased for today. This means that this call
option is [Select]
and N(d2) equals [Select]
250
. Increase decimal](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd3c134ff-b7ac-4f59-841d-6bdd50fc3944%2F4dda4ef6-2684-488a-a8b6-ef4a38304890%2Fyqemh05_processed.jpeg&w=3840&q=75)
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