Chapter 21, Problem 39PS

Summary Introduction

To calculate: The Black-Scholes value of the option when the risk-free interest rate is 0.5% p.m. and stock’s volatility = 7% p.m.

Introduction:

Black-Scholes value of the option: It is one of the pricing models which are used to compute the theoretical value of a put or call option. This model considers variables such as volatility, underlying stock price, strike price, risk-free rate and type of option in its calculations.