Question

show EQUATIONS IN EXCEL not just answers

	Q3	Use the Black-Scholes Option Pricing model to value a call option on the stock of Houston-based
		Long-Range Videoing Equipment Inc. d.b.a. Outfield Sign Stealers Inc.
		Current stock price	$15		d1	0.24495
		Option strike price	$15		d2	0
		Option time to maturity	6	months	N(d1)	0.596752427
		Stock return variance	0.12		N(d2)	0.5
		risk-free rate	6%

Answer 1

S = Current Stock Price =	15
t = time until option expiration(years) =	0.5000
X = Option Strike Price =	15
r = risk free rate(annual) =	0.06
s = standard deviation(annual) =	0.12
N = cumulative standard normal distribution
d1	= {ln (S/K) + (r +s^2/2)t}/s√t
	= {ln (15/15) + (0.06 + 0.12^2/2)*0.5}/0.12*√0.5
	0.396000
d2	= d1 - s√t
	= 0.396 - 0.12√0.5
	0.3111
Using z tables,
N(d1) =	0.6539
N(d2) =	0.6221
C = Call Premium =	=SN(d1) - N(d2)Ke^(-rt)
	= 15*0.6539 - 0.6221*15e^(-0.06*0.5)
	0.7528

Call Option = $0.75

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