The Black Sheep Inc.'s call option has the following characteristics: Exercise price of The Black Sheep Inc.'s call option ($)95 Annualized risk-free rate1.5% Time to expiration of the options (years)1.1 Standard deviation of the annual stock returns for The Black Sheep Inc.'s stock0.33
The Black Sheep Inc.'s call option has the following characteristics: Exercise price of The Black Sheep Inc.'s call option ($)95 Annualized risk-free rate1.5% Time to expiration of the options (years)1.1 Standard deviation of the annual stock returns for The Black Sheep Inc.'s stock0.33
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
Related questions
Question
9
![The Black Sheep Inc.'s call option has the
following characteristics:
Exercise price of The Black Sheep Inc.'s call
option ($)95
Annualized risk-free rate1.5%
Time to expiration of the options (years)1.1
Standard deviation of the annual stock
returns for The Black Sheep Inc.'s stock0.33
Per-share price for The Black Sheep Inc.'s
stock ($)70
The current value of this call option is
$3.1360 dollars, according to the Black-
Scholes option pricing formula. This means
that this call option is currently
[Select]
. Its time value premium equals
[ Select]
For a put option with the same
characteristics as above, the time value
premium equals
[ Select]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F53391419-dae7-4426-9951-fee4244d677d%2F71880fe0-0bc9-4eb8-ab93-0276d148c917%2Fr5v29fe_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The Black Sheep Inc.'s call option has the
following characteristics:
Exercise price of The Black Sheep Inc.'s call
option ($)95
Annualized risk-free rate1.5%
Time to expiration of the options (years)1.1
Standard deviation of the annual stock
returns for The Black Sheep Inc.'s stock0.33
Per-share price for The Black Sheep Inc.'s
stock ($)70
The current value of this call option is
$3.1360 dollars, according to the Black-
Scholes option pricing formula. This means
that this call option is currently
[Select]
. Its time value premium equals
[ Select]
For a put option with the same
characteristics as above, the time value
premium equals
[ Select]
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