Please Solve In 20mins 1. The Quick-time Company stock is currently selling for $32. There is a put option on the stockwith an exercise price of $29 with 6 months to maturity. The risk free rate is 2% and the1Svariance is .0625.A. What is the value of the put? Provide all your calculations for components (N(-d1), etc.)B. What is the value of the call using Put-Call parity?C. If Light-Step paid a dividend of S0.75 per share what would be the value of the put?

Stock Price 32.00 Strike Price 29.00 Variance 0.0625 Risk Free Rate 0.02 Time Period 6…

The Quick-time Company stock is currently selling for $32. There is a put option on the stock rith an exercise price of $29 with 6 months to maturity. The risk free rate is 2% and the ariance is .0625. A What is the value of the put? Provide all your calculations for components (N(-d1), etc.) B. What is the value of the call using Put-Call parity? C. If Light-Step paid a dividend of $0.75 per share what would be the value of the put?

The Quick-time Company stock is currently selling for $32. There is a put option on the stock rith an exercise price of $29 with 6 months to maturity. The risk free rate is 2% and the ariance is .0625. A What is the value of the put? Provide all your calculations for components (N(-d1), etc.) B. What is the value of the call using Put-Call parity? C. If Light-Step paid a dividend of $0.75 per share what would be the value of the put?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section20.A: The Black-scholes Option Pricing Model

Problem 1P

See similar textbooks

Similar questions

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?
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
Crisp Cookware’s common stock is expected to pay a dividend of $3 a share at the end of this year (D1 = $3.00); its beta is 0.8. The risk-free rate is 5.2%, and the market risk premium is 6%. The dividend is expected to grow at some constant rate g, and the stock currently sells for $40 a share. Assuming the market is in equilibrium, what does the market believe will be the stock’s price at the end of 3 years (i.e., what is )?
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?
Two investors are evaluating General Electric’s stock for possible purchase. They agree on the expected value of D1, and also on the expected future dividend growth rate. Further, they agree on the risk of the stock. However, one investor normally holds stocks for 2 years and the other normally holds stocks for 10 years. On the basis of the type of analysis done in this chapter, they should both be willing to pay the same price for General Electric’s stock. True or false? Explain.
The Black-Scholes model is used by Bulldogs Inc. to value call options on the stock of National Inc. The following information was determined by the analyst: · The share price is P30. · The price of the option is at P32. · The risk-free rate is 3%. · The option matures in 6 months In the formula of the current value of the call option under the Black-Scholes model, what is the exponent of “e” be? a. 0.25 b. -0.055 c. -0.015 d. 0.15
The Black-Scholes model is used by Bulldogs Inc. to value call options on the stock of National Inc. The following information was determined by the analyst:· The share price is P30.· The price of the option is at P32.· The risk-free rate is 3%.· The option matures in 6 monthsIn the formula of the current value of the call option under the Black-Scholes model, what is the exponent of “e” be? -0.015 0.15 0.25 -0.055