Use the Black-Scholes formula for the following stock:Time to expirationStandard deviationExercise priceStock priceAnnual interest rateDividend6 months53% per year$43$433%0Recalculate the value of the call with the following changes:a. Time to expirationb. Standard deviation3 monthsc. Exercise priced. Stock pricee. Interest rate25% per year$49$495%Select each scenario independently.Note: Round your answers to 2 decimal places.Value of theCall Optiona. C falls tob. C falls toc. C falls tod. C rises toe. C rises to

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Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 5P

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Consider shorting a call option c on a stock S where S = 24 is the value of the stock, K = 30 is the strike price, T = ½ is the expiration date, r = 0.04 is the continuously compounded interest rate per year, and  = 0.3 is the volatility of the price of the stock. Determine the delta ratio Δ .
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Baghiben
Stock price S=$21 Exercise price K= $20 Interest rate r = 0.08 Maturity T= 180 days = 0.5 Standard deviation=0.5 1. What is the correct price of the put?

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