The stock price five months from the expiration of an option is $42, the exercise price of the option is $40, the continuously compounded risk-free interest rate is 11% per annum, and the volatility (o) is 21% per annum. Calculate the price of the option if it is a European call. Calculate the price of the option if it is a European put. a. b.

The stock price five months from the expiration of an option is $42, the exercise price of the option is $40, the continuously compounded risk-free interest rate is 11% per annum, and the volatility (o) is 21% per annum. Calculate the price of the option if it is a European call. Calculate the price of the option if it is a European put. a. b.

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

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