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Intermediate Problems 4-5 BLACK-SCHOLES MODEL Assume that you have been given the following information on Fire Industries: Current stock price = $16 Exercise price of option = $16 Time until expiration of option = 6 months Risk-free rate = 8% Variance of stock price = 0.12 d 1 =0.28577 d 2 = 0.04082 N(d 1 ) = 0.61247 N(d 2 ) = 051628 Using the Black-Scholes Option Pricing Model, what is the value of the option?

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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250
BuyFind

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250

Solutions

Chapter
Section
Chapter 18, Problem 4P
Textbook Problem

Intermediate Problems 4-5

BLACK-SCHOLES MODEL Assume that you have been given the following information on Fire Industries:

Current stock price = $16 Exercise price of option = $16
Time until expiration of option = 6 months Risk-free rate = 8%
Variance of stock price = 0.12 d1 =0.28577
d2 = 0.04082 N(d1) = 0.61247
N(d2) = 051628  

Using the Black-Scholes Option Pricing Model, what is the value of the option?

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