A European call option on shares has 3 months to expiry. The exercise price of the option is $2.50, and the current price of the share is $3. The standard deviation of the share is 20% and the risk-free rate is 5%. Required: Calculate the value of the call option per share using the Black-Scholes formula.
A European call option on shares has 3 months to expiry. The exercise price of the option is $2.50, and the current price of the share is $3. The standard deviation of the share is 20% and the risk-free rate is 5%. Required: Calculate the value of the call option per share using the Black-Scholes formula.
Fundamentals of Financial Management (MindTap Course List)
14th Edition
ISBN:9781285867977
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter18: Derivatives And Risk Management
Section18.A: Valuation Of Put Options
Problem 1P
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Q 2.
A European call option on shares has 3 months to expiry. The exercise price of the option is $2.50,
and the current price of the share is $3. The standard deviation of the share is 20% and the risk-free
rate is 5%.
Required:
Calculate the value of the call option per share using the Black-Scholes formula.
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