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The following information applies to the next two questions. Use the Black-Scholes Option Pricing Model for...

The following information applies to the next two questions.

Use the Black-Scholes Option Pricing Model for the following option.

Stock price   S0 = $70;

Time to Maturity T = 6 months;

Risk free rate r = 10% annually;

Standard deviation STD = 50% per year.

No dividends will be paid before option expires.

10. What is the value of d1 in the Black-Scholes model for a call option with a striking price of $70 on the above stock?  

            a. $0.21

            b. $0.32

            c.   $0.43

            d. $0.54

11 What is the Black-Scholes value of the above call option in previous problem?

            a. $11.56

            b. $13.75

            c.   $14.53

            d. $15.74

Solutions

Expert Solution

1.

0.32

2.

11.56

jeff jeffy answered 1 year ago
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