The market price of a one-year European call option is $9.243, written on a stock that is currently selling for $70. The stock is expected to go ex‑dividend in 6 months on a declared dividend of $5. The exercise price of the call is $80 and the current riskless rate of return is 3% per annum. What is the volatility (standard deviation) implied by the market price of this call option and an appropriate option pricing model allowing for dividends? Your answer should be within 2% of the correct solution (i.e., the correct σ ± .02).
The market price of a one-year European call option is $9.243, written on a stock that is currently selling for $70. The stock is expected to go ex‑dividend in 6 months on a declared dividend of $5. The exercise price of the call is $80 and the current riskless rate of return is 3% per annum. What is the volatility (standard deviation) implied by the market price of this call option and an appropriate option pricing model allowing for dividends? Your answer should be within 2% of the correct solution (i.e., the correct σ ± .02).
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
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The market price of a one-year European call option is $9.243, written on a stock that is currently selling for $70. The stock is expected to go ex‑dividend in 6 months on a declared dividend of $5. The exercise price of the call is $80 and the current riskless
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