Assume that you have been given the following information on Purcell Corporation's call options: Inputs Current stock price = $14 Time to maturity of option = 3 months Variance of stock return = 0.15 Strike price of option = $13 Risk-free rate = 7% $ Intermediate Calculations d₁ = 0.56989 d2 = 0.37624 N(d₁) = 0.71562 N(d₂) = 0.64663 According to the Black-Scholes option pricing model, what is the option's value? Do not round intermediate calculations. Round your answer to the nearest cent. Use only the values provided in the problem statement for your calculations.

Assume that you have been given the following information on Purcell Corporation's call options: Inputs Current stock price = $14 Time to maturity of option = 3 months Variance of stock return = 0.15 Strike price of option = $13 Risk-free rate = 7% $ Intermediate Calculations d₁ = 0.56989 d2 = 0.37624 N(d₁) = 0.71562 N(d₂) = 0.64663 According to the Black-Scholes option pricing model, what is the option's value? Do not round intermediate calculations. Round your answer to the nearest cent. Use only the values provided in the problem statement for your calculations.

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 4P: Put–Call Parity The current price of a stock is $33, and the annual risk-free rate is 6%. A call...

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In 1973, Fischer Black and Myron Scholes developed the Black-Scholes option pricing model (OPM). (1) What assumptions underlie the OPM? (2) Write out the three equations that constitute the model. (3) According to the OPM, what is the value of a call option with the following characteristics? Stock price = 27.00 Strike price = 25.00 Time to expiration = 6 months = 0.5 years Risk-free rate = 6.0% Stock return standard deviation = 0.49
Put–Call Parity The current price of a stock is $33, and the annual risk-free rate is 6%. A call option with a strike price of $32 and with 1 year until expiration has a current value of $6.56. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option?
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