Question

In: Finance

Refer to the following characteristics: Stock price - $54 Exercise price = $58

Refer to the following characteristics:

Stock price                     - $54

Exercise price                = $58

Risk-free rate                  =6% per year, compounded continuously

Maturity                           = 3 months

Standard deviation           = 62% per year

What are the prices of a call option and a put option? (Do not round intermediate calculations. Round the answers to 2 decimal places. Omit $ sign in your response.)

Price of call option __________.

Price of put option __________.

Solutions

Expert Solution

Given

Stock Price, i.e. current price also known as underlying asset price = 54
Exercise price, i.e. Strike price = 58
RF = 6%, continuously compounded
Maturity, n = 3 months
Standard deviation, volatility = 62% per year

Hence, after calculations we have:

Price of Call Option = 5.34

 

Price of Put Option = 8.49

Price of Call Option = 5.34

 

Price of Put Option = 8.49

Junaid answered 2 years ago
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