Question
In: Finance
please show formulas You have been given the following information on a call option on the...
please show formulas
| You have been given the following information on a call option on the stock of Puckett Industries: | ||||||||
| P = | $65 | X = | $70 | |||||
| t = | 0.5 | rRF= | 5% | |||||
| s = | 0.50 | |||||||
| a. Using the Black-Scholes Option Pricing Model, what is the value of the call option? | ||||||||
| First, we will use formulas from the text to solve for d1and d2. | ||||||||
| Hint: use the NORMSDIST function. | ||||||||
| (d1) | = | N(d1) = | ||||||
| (d2) | = | N(d2) = | ||||||
| Using the formula for option value and the values of N(d) from above, we can find the call option value. | ||||||||
| VC | = | |||||||
| b. Suppose there is a put option on Puckett's stock with exactly the same inputs as the call option. What is the value of the put? | |||||||||
| Put option using Black-Scholes modified formula | = | ||||||||
| Put option using put-call parity | = | ||||||||
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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