Use the Black-Scholes formula for the following stock: Time to expiration Standard deviation Exercise price 6 months 54% per year $54 Stock price $54 Annual interest rate 4% 0 Dividend Recalculate the value of the call with the following changes: a. Time to expiration. b. Standard deviation 3 months c. Exercise price d. Stock price 20% per year $60 $60 6% e. Interest rate Select each scenario independently. Note: Round your answers to 2 decimal places. Value of the Call Option a. C falls to b. C falls to C. C falls to d. C rises to e. C rises to

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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Use the Black-Scholes formula for the following stock:
Time to expiration
Standard deviation
Exercise price
6 months
54% per year
$54
Stock price
$54
Annual interest rate
4%
0
Dividend
Recalculate the value of the call with the following changes:
a. Time to expiration.
b. Standard deviation
3 months
c. Exercise price
d. Stock price
20% per year
$60
$60
6%
e. Interest rate
Select each scenario independently.
Note: Round your answers to 2 decimal places.
Value of the
Call Option
a.
C falls to
b. C falls to
C.
C falls to
d. C rises to
e.
C rises to
Transcribed Image Text:Use the Black-Scholes formula for the following stock: Time to expiration Standard deviation Exercise price 6 months 54% per year $54 Stock price $54 Annual interest rate 4% 0 Dividend Recalculate the value of the call with the following changes: a. Time to expiration. b. Standard deviation 3 months c. Exercise price d. Stock price 20% per year $60 $60 6% e. Interest rate Select each scenario independently. Note: Round your answers to 2 decimal places. Value of the Call Option a. C falls to b. C falls to C. C falls to d. C rises to e. C rises to
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