Question

Rebecca is interested in purchasing a European call on a hot new​ stock, Up, Inc. The call has a strike price of $ 99.00 and expires in 85 days. The current price of Up stock is $ 122.42​, and the stock has a standard deviation of 43 % per year. The​ risk-free interest rate is 6.62 % per year. Up stock pays no dividends. Use a​ 365-day year. a. Using the​ Black-Scholes formula, compute the price of the call. b. Use​ put-call parity to compute the price of the put with the same strike and expiration date. ​(Note​: Make sure to round all intermediate calculations to at least five decimal places.​) ​

Using the​ Black-Scholes formula, compute the price of the call.

The price of the call is ​$___________.​(Round to two decimal​places.)

b. Use​ put-call parity to compute the price of the put with the same strike and expiration date.

The price of the put is ​$___________.​ (Round to two decimal​places.)

Answer 1

1.

26.492

2.

1.5575