Black-Scholes This problem is a bit of work but I'm curious to see if I got...

Black-Scholes This problem is a bit of work but I'm curious to see if I got it right. I think i did

XYZ stock is being traded at $115 today. Consider European put and call options with an exercise price of $110. The option expires in 91 days and the volatility is 0.50. The risk-free rate (continuously compounded) is 2.5%. Use actual/365 day count method.

A) Calculate the values of the put and call options. Assume there will be no dividend before the option expires.

B) Calculate the values of the put and call options, but assume now the continuously compounded dividend yield is 2%.

Expert Solution

a) call price=14.21
put price=8.53

b)call price=13.85
put price=8.74

jeff jeffy answered 1 year ago

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