Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Question
Chapter 13, Problem 1P
To determine
Calculate the
Expert Solution & Answer
Explanation of Solution
Price of six month European call option can be calculated by using the Black-Scholes equation as follow.
Table 1
| Stock price (S0) | 120 |
| Investment cost (K) | 150 |
| Volatility | 0.45 |
| Time to investment decision (T) | 0.5 |
| Risk free rate (r) | 0.06 |
| Dividend yield (w) | 0 |
| Call value | 6.97 |
| Put value | 32.53 |
| d1 | -0.447892596 |
| d2 | -0.766090647 |
| N(d1) | 0.327115356 |
| N(d2) | 0.221811184 |
| N(-d1) | 0.672884644 |
| N(-d2) | 0.778788816 |
The value of the call option is $6.97 that obtained by using black-Scholes equations.
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Chapter 13 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 13 - Prob. 1PCh. 13 - Prob. 2PCh. 13 - Prob. 3PCh. 13 - Prob. 4PCh. 13 - Prob. 5PCh. 13 - Prob. 6PCh. 13 - Prob. 7PCh. 13 - Prob. 8PCh. 13 - Prob. 9PCh. 13 - Prob. 10P
Ch. 13 - Prob. 11PCh. 13 - Prob. 12PCh. 13 - Prob. 13PCh. 13 - Prob. 14PCh. 13 - Prob. 15PCh. 13 - Prob. 16PCh. 13 - Prob. 17PCh. 13 - Prob. 18PCh. 13 - Prob. 19PCh. 13 - Prob. 20PCh. 13 - Prob. 21PCh. 13 - Prob. 22PCh. 13 - Prob. 23PCh. 13 - Prob. 24PCh. 13 - Prob. 25PCh. 13 - Prob. 1STCh. 13 - Prob. 2STCh. 13 - Prob. 3STCh. 13 - Prob. 4ST
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