The Black–Scholes option pricing model (OPM) was developed in 1973. The creation of the Black–Scholes OPM played a significant role in the rapid growth of options trading. The derivation of the Black–Scholes Option Pricing Model rests on the concept of a riskless hedge or leveraged buyout According to the Black–Scholes Option Pricing Model, as the variance, σ2σ2, increases, the value of the call option increase or decrease Happy Orange Storage Company has a current stock price of $28.00. A call option on this stock has an exercise price of $28.00 and 0.25 year to maturity. The variance of the stock price is 0.09, and the risk-free rate is 6%. You calculate d₁ to be 0.18 and N(0.18) to be 0.5714. Therefore, d₂ will be 0.03 and N(0.03) will be 0.5120. Using the Black–Scholes Option Pricing Model, what is the value of the option? (Note: Use 2.7183 as the approximate value of e.) $1.877 $1.408 $1.971 $1.689
The Black–Scholes option pricing model (OPM) was developed in 1973. The creation of the Black–Scholes OPM played a significant role in the rapid growth of options trading. The derivation of the Black–Scholes Option Pricing Model rests on the concept of a riskless hedge or leveraged buyout According to the Black–Scholes Option Pricing Model, as the variance, σ2σ2, increases, the value of the call option increase or decrease Happy Orange Storage Company has a current stock price of $28.00. A call option on this stock has an exercise price of $28.00 and 0.25 year to maturity. The variance of the stock price is 0.09, and the risk-free rate is 6%. You calculate d₁ to be 0.18 and N(0.18) to be 0.5714. Therefore, d₂ will be 0.03 and N(0.03) will be 0.5120. Using the Black–Scholes Option Pricing Model, what is the value of the option? (Note: Use 2.7183 as the approximate value of e.) $1.877 $1.408 $1.971 $1.689
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter8: Financial Options And Applications In Corporate Finance
Section: Chapter Questions
Problem 5MC: In 1973, Fischer Black and Myron Scholes developed the Black-Scholes option pricing model (OPM). (1)...
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The Black–Scholes option pricing model (OPM) was developed in 1973. The creation of the Black–Scholes OPM played a significant role in the rapid growth of options trading.
The derivation of the Black–Scholes Option Pricing Model rests on the concept of a riskless hedge or leveraged buyout
According to the Black–Scholes Option Pricing Model, as the variance, σ2σ2, increases, the value of the call option increase or decrease
Happy Orange Storage Company has a current stock price of $28.00. A call option on this stock has an exercise price of $28.00 and 0.25 year to maturity. The variance of the stock price is 0.09, and the risk-free rate is 6%. You calculate d₁ to be 0.18 and N(0.18) to be 0.5714. Therefore, d₂ will be 0.03 and N(0.03) will be 0.5120. Using the Black–Scholes Option Pricing Model, what is the value of the option? (Note: Use 2.7183 as the approximate value of e.)
$1.877
$1.408
$1.971
$1.689
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