Strike price of $100 and expires in 90 days. The current price of Up stock is $120, and the stock has a standard deviation of 40% per year. The risk-free interest rate is 6.18% per year. Using the Black-Scholes formula, compute the price of the call. Use put-call parity to compute the price of the put with the same strike and expiration date

Strike price of $100 and expires in 90 days. The current price of Up stock is $120, and the stock has a standard deviation of 40% per year. The risk-free interest rate is 6.18% per year. Using the Black-Scholes formula, compute the price of the call. Use put-call parity to compute the price of the put with the same strike and expiration date

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 7P

See similar textbooks

Similar questions

Binomial Model The current price of a stock is 20. In 1 year, the price will be either 26 or 16. The annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price of 21 and that expires in 1 year. (Hint: Use daily compounding.)
A stock is trading at $80 per share. The stock is expected to have a yearend dividend of $4 per share (D1 = $4), and it is expected to grow at some constant rate, g, throughout time. The stock’s required rate of return is 14% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of gL?
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?
The company’s stock price is $85 and will have a strike price of $90 in six months. The standard deviation is at 0.50 and risk-free rate is 5%. Determine the following: a. the value of the call option b. value of the put option c. put-call parity
). Suppose the call option of Tesla company has an exercise price of $200 and expires in 90 days. Assume the current price of Tesla stock is $240, with a standard deviation of 40% per year. The risk-free interest rate is 6.18% per year. First, using the Black-Scholes formula, compute the price of the call. And then use put-call parity to compute the price of the put with the same strike and expiration date. Based on put-call parity, what should be the put option price? a. $ 2.65 b. $ 1.78 c. $ 3.69 d. $ 4.22 e. None of the above
Suppose the call option of Tesla company has an exercise price of $200 and expires in 90 days. Assume the current price of Tesla stock is $240, with a standard deviation of 40% per year. The risk-free interest rate is 6.18% per year. First, using the Black-Scholes formula, compute the price of the call. And then use put-call parity to compute the price of the put with the same strike and expiration date. Based on put-call parity, what should be the put option price? $ 2.65 $ 1.78 $ 3.69 $ 4.22 None of the above
ABC stock is currently trading at R70 per share. A dividend of R1 is expected after three monthsand another one of R1 after six months. A European call option on ABC stock has a strike priceof R65 and 8 months to maturity. Given that the risk-free rate is 10% and the volatility is 32%,compute the price of the option.
A stock currently trades for $120 per share. Call options on the stock are available with a strike price of $125. The options expire in one month. The annualized risk free rate is 3%, and the expected volatility (annual) for the stock is 35%. Use the Black-Scholes option pricing model to calculate the price of the call option.
The current price of Estelle Corporation stock is $23.00. In each of the next two years, this stock price will either go up by 23% or go down by 23%. The stock pays no dividends. The one-year risk-free interest rate is 5.0% and will remain constant. Using the Binomial Model, calculate the price of a one-year call option on Estelle stock with a strike price of $23.00.
A stock is selling at INR 1,250. There exists a call option on this stock with expiry in 60 daysand an exercise price of INR 1,300. It is estimated that every 30 days, the stock price couldeither increase by 7% or decrease by 5%. The risk-free rate is 6%. Calculate the put price byusing the two-period binomial options pricing model.(Consider 360day-year)