In: Finance
The current stock price of Johnson & Johnson is $62, and the stock does not pay dividends. The instantaneous risk-free rate of return is 3%. The instantaneous standard deviation of J&J's stock is 35%. You want to purchase a put option on this stock with an exercise price of $53 and an expiration date 72 days from now. Using Black-Scholes, the put option should be worth ______ today.
Value of Put | 0.6750 |
WORKINGS
Input Data | ||
Stock Price now (P) | 62 | |
Exercise Price of Option (EX) | 53 | |
Number of periods to Exercise in years (t) | 0.197260274 | |
Compounded Risk-Free Interest Rate (rf) | 3.00% | |
Standard Deviation (annualized s) | 35.00% | |
Output Data | ||
Present Value of Exercise Price (PV(EX)) | 52.6873 | |
s*t^.5 | 0.1554 | |
d1 | 1.1248 | |
d2 | 0.9693 | |
Delta N(d1) Normal Cumulative Density Function | 0.8697 | |
Bank Loan N(d2)*PV(EX) | 43.9309 | |
Value of Call | 9.9877 | |
Value of Put | 0.6750 |
Formulae used