Use the Black-Scholes formula to value the following options: a. A call option written on a stock selling for $78 per share with a $78 exercise price. The stock's standard deviation is 8% per month The option matures in three months. The risk-free interest rate is 1.75% per month. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Call value b. A put option written on the same stock at the same time, with the same exercise price and expiration date. (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Put value

Use the Black-Scholes formula to value the following options: a. A call option written on a stock selling for $78 per share with a $78 exercise price. The stock's standard deviation is 8% per month The option matures in three months. The risk-free interest rate is 1.75% per month. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Call value b. A put option written on the same stock at the same time, with the same exercise price and expiration date. (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Put value

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 4P: Put–Call Parity The current price of a stock is $33, and the annual risk-free rate is 6%. A call...

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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
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