BSM model. Mars Corp. common shares are trading at $46 on the market. Currently, the continuously compounded risk - free rate is 9% per year and the annual standard deviation of the continuously compounded rate of return on Mars shares is 16%. There are put and call options on Mars common shares with an exercise price of $48 and a 180-day expiry date? Using the Black- Scholes option pricing model, calculate the following: Notes: 1. The cumulative standard normal table is available on Moodle. 2. Use full accuracy in all the calculations excep for finding N( d1,2) These values are supposed to come from the table, which has 2 decimals accuracy. Thus, if you are using Excel you must round the arguments of d1,2 to 2 decimals, and N(d1, 2) to 4 decimals. a. What is the value of d1 ? Number Round your answer to two decimal places. b. What is the value of call delta? Number Round your answer to four decimal places. c. What is the value of the call option? $ Number Round your answer to two decimal places. d. What is the value of the put option?
BSM model. Mars Corp. common shares are trading at $46 on the market. Currently, the continuously compounded risk - free rate is 9% per year and the annual standard deviation of the continuously compounded rate of return on Mars shares is 16%. There are put and call options on Mars common shares with an exercise price of $48 and a 180-day expiry date? Using the Black- Scholes option pricing model, calculate the following: Notes: 1. The cumulative standard normal table is available on Moodle. 2. Use full accuracy in all the calculations excep for finding N( d1,2) These values are supposed to come from the table, which has 2 decimals accuracy. Thus, if you are using Excel you must round the arguments of d1,2 to 2 decimals, and N(d1, 2) to 4 decimals. a. What is the value of d1 ? Number Round your answer to two decimal places. b. What is the value of call delta? Number Round your answer to four decimal places. c. What is the value of the call option? $ Number Round your answer to two decimal places. d. What is the value of the put option?
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 22P
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Transcribed Image Text:BSM model. Mars Corp. common shares are
trading at $46 on the market. Currently, the
continuously compounded risk - free rate is 9% per
year and the annual standard deviation of the
continuously compounded rate of return on Mars
shares is 16%. There are put and call options on
Mars common shares with an exercise price of $48
and a 180-day expiry date? Using the Black-
Scholes option pricing model, calculate the
following: Notes: 1. The cumulative standard
normal table is available on Moodle. 2. Use full
accuracy in all the calculations excep for finding N(
d1,2) These values are supposed to come from
the table, which has 2 decimals accuracy. Thus, if
you are using Excel you must round the arguments
of d1,2 to 2 decimals, and N(d1, 2) to 4 decimals. a.
What is the value of d1 ? Number Round your
answer to two decimal places. b. What is the value
of call delta? Number Round your answer to four
decimal places. c. What is the value of the call
option? $ Number Round your answer to two
decimal places. d. What is the value of the put
option?
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