A stock is selling today for $110. The stock has an annual volatility of 64 percent and the annual risk-free rate is 7 percent. c. Calculate the fair price for a 1 year European put option with an exercise price of $95. d. Calculate how much the current stock price would need to change for the purchaser of the put option to break even in one year. e. Calculate the level of volatility that would make a $95 call option sell for $30. (Use Goal Seek or Solver). f. Calculate the level of volatility that would make a $95 put option sell for $8. (Use Goal Seek or Solver). Please show work using excel
A stock is selling today for $110. The stock has an annual volatility of 64 percent and the annual risk-free rate is 7 percent. c. Calculate the fair price for a 1 year European put option with an exercise price of $95. d. Calculate how much the current stock price would need to change for the purchaser of the put option to break even in one year. e. Calculate the level of volatility that would make a $95 call option sell for $30. (Use Goal Seek or Solver). f. Calculate the level of volatility that would make a $95 put option sell for $8. (Use Goal Seek or Solver). Please show work using excel
Chapter20: Financing With Derivatives
Section: Chapter Questions
Problem 2P
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Question
A stock is selling today for $110. The stock has an annual volatility of 64 percent and the annual
risk-free rate is 7 percent.
c.
Calculate the fair price for a 1 year European put option with an exercise price of $95.
d. Calculate how much the current stock price would need to change for the purchaser of
the put option to break even in one year.
e. Calculate the level of volatility that would make a $95 call option sell for $30. (Use Goal
Seek or Solver).
f.
Calculate the level of volatility that would make a $95 put option sell for $8. (Use Goal
Seek or Solver).
Please show work using excel
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