Question
In: Finance
Using the following inputs find the implied volatility. The value of a call option on Tesla...
Using the following inputs find the implied volatility. The value of a call option on Tesla that has four months to maturity is $5.74. Tesla pays no dividends. Stock price $44 Risk-free rate 3% Strike price $44 Hint: Use the Black-Scholes formula Find the implied volatility (round your answer to the nearest whole percent). Decimal form or whole number is accepted)
Solutions
Expert Solution
Implied volatility = 55%
There is no specific formula to compute implied volatility but we can compute implied volatility by back calculation of Black-scholes formula.
We can use goal seek function of excel to determine implied volatility of given call call option.
Firstly set black-scholes formula for value of call option in excel and then use goal seek in following manner:
Cell reference -
jeff jeffy answered 1 year agoRelated Solutions
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Use the binomial option pricing model to find the implied
premium of a CALL option on Wendy’s. Wendy’s stock is currently
trading at $20.66. Have the model price at 10 day intervals for 3
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risk free rate is 2.5% and the volatility(standard deviation) of
the stock is .40. Show the entire binomial tree.
Use the Black-Scholes model to find the price for a call option with the following inputs:...
Use the Black-Scholes model to find the price for a call option
with the following inputs: (1) current stock price is $30, (2)
strike price is $36, (3) time to expiration is 6 months, (4)
annualized risk-free rate is 7%, and (5) variance of stock return
is 0.16. Do not round intermediate calculations. Round your answer
to the nearest cent.
Find the price for a call option with the following inputs: Current stock price = $25...
Find the price for a call option with the following inputs:
Current stock price = $25 Strike price of option = $30
Time until option expires = 6 months Risk-free rate = 3%
Standard deviation of stock returns = 18%
Using the Black Scholes Option Pricing Model Formula
Given all the information above, what would be the value of a
put option on the above stock with a strike price of $30?
Use the Black-Scholes model to find the price for a call option with the following inputs:...
Use the Black-Scholes model to find
the price for a call option with the following inputs: (1) current
stock price is $45, (2) exercise price is
$50, (3) time to expiration is 3
months, (4) annualized risk-free rate is 3%, and
(5) variance of stock return is 0.50.
AND based on the information above,
find the value of a put with a $50 exercise price.
(SHOW CALCULATIONS PLEASE)
why you did not find a single implied volatility for each stock and why your implied...
why you did not find a single implied volatility for each stock
and why your implied volatilities were arrayed as they are?
MSFT
Strike
Option Price
Implied-Volatility
B-S Implied Volatility
175.
4.95
0.3279
0.132178
177.5
3.32
0.3157
0.124592
180.
2.04
0.3103
0.118525
182.5
1.13
0.3027
0.113638
185.
0.58
0.302
0.111275
Strike
Option Price
Implied-Volatility
B-S Implied Volatility
175.
1.32
0.3477
0.105137
177.5
2.2
0.3413
0.100382
180.
3.41
0.332
0.0930169
182.5
5.05
0.3452
0.0846884
185.
7.
0.3477
0.0560192
Use the Black-Scholes formula to find the value of a call option based on the following...
Use the Black-Scholes formula to find the value of a call option
based on the following inputs. (Round your final answer to
2 decimal places. Do not round intermediate
calculations.)
Stock price
$
36.00
Exercise price
$
45.00
Interest rate
6.00
%
Dividend yield
5.00
%
Time to expiration
0.5833
Standard deviation of stock’s returns
49.00
%
Call value
$
?
Use the Black-Scholes formula to find the value of a call option based on the following...
Use the Black-Scholes formula to find the value of a call option
based on the following inputs. (Round your final answer to
2 decimal places. Do not round intermediate
calculations.)
Stock price
$
53.00
Exercise price
$
51.00
Interest rate
5.00
%
Dividend yield
3.00
%
Time to expiration
0.2500
Standard deviation of stock’s returns
38.00
%
Call value
$
Use the Black-Scholes formula to find the value of a call option based on the following...
Use the Black-Scholes formula to find the value of a call option
based on the following inputs. (Round your final answer to
2 decimal places. Do not round intermediate
calculations.)
Stock price
$
39.00
Exercise price
$
31.00
Interest rate
6.00
%
Dividend yield
1.00
%
Time to expiration
0.9167
Standard deviation of stock’s returns
26.00
%
Call value
Use the Black-Scholes formula to find the value of a call option based on the following...
Use the Black-Scholes formula to find the value of a call option
based on the following inputs. (Round your final answer to
2 decimal places. Do not round intermediate
calculations.)
Stock price
$
38.00
Exercise price
$
40.00
Interest rate
3.00
%
Dividend yield
5.00
%
Time to expiration
0.7500
Standard deviation of stock’s returns
40.00
%
Call value
$
Use the binomial option pricing model to find the value of a call option on £10,000...
Use the binomial option pricing model to find the value of a
call option on £10,000 with a strike price of €12,500. The current
exchange rate is €1.50/£1.00 and in the next period the exchange
rate can increase to €2.40/£ or decrease to €0.9375/€1.00 (i.e.
u = 1.6 and d = 1/u = 0.625). The
current interest rates are i€ = 3% and are
i£ = 4%. Choose the answer closest to
yours.
€3,373
€3,275
€3,243
€2,500
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