The current price of a non - dividend paying stock is $617 and the annual standard deviation of the rate of return on the stock is 32%. A European call option on the stock expires in 0.5 years. Its strike price is $630. The risk - free rate is 2% (continuously compounded) What should be the price (premium) of the call option?
The current price of a non - dividend paying stock is $617 and the annual standard deviation of the rate of return on the stock is 32%. A European call option on the stock expires in 0.5 years. Its strike price is $630. The risk - free rate is 2% (continuously compounded) What should be the price (premium) of the call option?
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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The current price of a non - dividend paying stock is $617 and the annual standard deviation of the rate of return on the stock is 32%. A European call option on the stock expires in 0.5 years. Its strike price is $630. The risk - free rate is 2% (continuously compounded) What should be the price (premium) of the call option?
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