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In addition to the five factors, dividends also affect the price of an option. The Black-Scholes...
In addition to the five factors, dividends also affect the price of an option. The Black-Scholes Option Pricing Model with dividends is: C=S×e−dt×N(d1)−E×e−Rt×N(d2) d1= [ln(S /E ) +(R−d+σ2/2)×t ] (σ×t√) d2=d1−σ×t√ All of the variables are the same as the Black-Scholes model without dividends except for the variable d, which is the continuously compounded dividend yield on the stock. The put-call parity condition is also altered when dividends are paid. The dividend-adjusted put-call parity formula is: S×e−dt+P=E×e−Rt+C where d is again the continuously compounded dividend yield. A stock is currently priced at $89 per share, the standard deviation of its return is 46 percent per year, and the risk-free rate is 4 percent per year, compounded continuously. What is the price of a put option with a strike price of $85 and a maturity of six months if the stock has a dividend yield of 2 percent per year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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Expert Solution
SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE
jeff jeffy answered 1 year agoRelated Solutions
In addition to the five factors, dividends also affect the price of an option. The Black–Scholes...
In addition to the five factors, dividends also affect the price
of an option. The Black–Scholes Option Pricing Model with dividends
is:
C=S×e−dt×N(d1)−E×e−Rt×N(d2)C=S×e−dt×N(d1)−E×e−Rt×N(d2)
d1=[ln(S/E)+(R−d+σ2/2)×t](σ−t√)d1= [ln(S /E ) +(R−d+σ2/2)×t ] (σ−t)
d2=d1−σ×t√d2=d1−σ×t
All of the variables are the same as the Black–Scholes model
without dividends except for the variable d, which is the
continuously compounded dividend yield on the stock.
The put–call parity condition is also altered when dividends are
paid. The dividend-adjusted put–call parity formula is:
S×e−dt+P=E×e−Rt+CS×e−dt+P=E×e−Rt+C
where...
In addition to the five factors, dividends also affect the price of an option. The Black–Scholes...
In addition to the five factors, dividends also affect the price
of an option. The Black–Scholes Option Pricing Model with dividends
is:
C=S×e−dt×N(d1)−E×e−Rt×N(d2)C=S×e−dt×N(d1)−E×e−Rt×N(d2)
d1=[ln(S/E)+(R−d+σ2/2)×t](σ−t√)d1= [ln(S /E ) +(R−d+σ2/2)×t ] (σ−t)
d2=d1−σ×t√d2=d1−σ×t
All of the variables are the same as the Black–Scholes model
without dividends except for the variable d, which is the
continuously compounded dividend yield on the stock.
A stock is currently priced at $87 per share, the standard
deviation of its return is 42 percent...
In addition to the five factors, dividends also affect the price of an option. The Black–Scholes...
In addition to the five factors, dividends also affect the price
of an option. The Black–Scholes Option Pricing Model with dividends
is:
C=S×e−dt×N(d1)−E×e−Rt×N(d2)C=S×e−dt×N(d1)−E×e−Rt×N(d2)
d1=[ln(S/E)+(R−d+σ2/2)×t](σ−t√)d1= [ln(S /E ) +(R−d+σ2/2)×t ] (σ−t)
d2=d1−σ×t√d2=d1−σ×t
All of the variables are the same as the Black–Scholes model
without dividends except for the variable d, which is the
continuously compounded dividend yield on the stock.
The put–call parity condition is also altered when dividends are
paid. The dividend-adjusted put–call parity formula is:
S×e−dt+P=E×e−Rt+CS×e−dt+P=E×e−Rt+C
where...
In addition to the five factors, dividends also affect the price of an option. The Black–Scholes...
In addition to the five factors, dividends also affect the price
of an option. The Black–Scholes Option Pricing Model with dividends
is:
C=S×e−dt×N(d1)−E×e−Rt×N(d2)C=S×e−dt×N(d1)−E×e−Rt×N(d2)
d1=[ln(S/E)+(R−d+σ2/2)×t](σ−t√)d1= [ln(S /E ) +(R−d+σ2/2)×t ] (σ−t)
d2=d1−σ×t√d2=d1−σ×t
All of the variables are the same as the Black–Scholes model
without dividends except for the variable d, which is the
continuously compounded dividend yield on the stock.
A stock is currently priced at $82 per share, the standard
deviation of its return is 48 percent...
In addition to the five factors, dividends also affect the price of an option. The Black–Scholes...
In addition to the five factors, dividends also affect the price
of an option. The Black–Scholes Option Pricing Model with dividends
is:
C=S×e−dt×N(d1)−E×e−Rt×N(d2)C=S×e−dt×N(d1)−E×e−Rt×N(d2)
d1=[ln(S/E)+(R−d+σ2/2)×t](σ−t√)d1= [ln(S /E ) +(R−d+σ2/2)×t ] (σ−t)
d2=d1−σ×t√d2=d1−σ×t
All of the variables are the same as the Black–Scholes model
without dividends except for the variable d, which is the
continuously compounded dividend yield on the stock.
The put–call parity condition is also altered when dividends are
paid. The dividend-adjusted put–call parity formula is:
S×e−dt+P=E×e−Rt+CS×e−dt+P=E×e−Rt+C
where...
In addition to the five factors, dividends also affect the price of an option. The Black–Scholes...
In addition to the five factors, dividends also affect the price
of an option. The Black–Scholes Option Pricing Model with dividends
is: C=S×e−dt×N(d1)−E×e−Rt×N(d2) d1=[ln(S/E)+(R−d+σ2/2)×t](σ−t√)
d2=d1−σ×t√ All of the variables are the same as the Black–Scholes
model without dividends except for the variable d, which is the
continuously compounded dividend yield on the stock. The put–call
parity condition is also altered when dividends are paid. The
dividend-adjusted put–call parity formula is: S×e−dt+P=E×e−Rt+C
where d is again the continuously compounded dividend yield....
In addition to the five factors, dividends also affect the price of an option. The Black-Scholes...
In addition to the five factors, dividends also affect the price
of an option. The Black-Scholes Option Pricing Model with dividends
is: C=S×e−dt×N(d1)−E×e−Rt×N(d2)
d1= [ln(S /E ) +(R−d+σ2/2)×t ] (σ×t√) d2=d1−σ×t√ All of the
variables are the same as the Black-Scholes model without dividends
except for the variable d, which is the continuously compounded
dividend yield on the stock. A stock is currently priced at $80 per
share, the standard deviation of its return is 53 percent per year,
and...
In addition to the five factors discussed in the chapter, dividends also affect the price of...
In addition to the five factors discussed in the chapter,
dividends also affect the price of an option. The Black–Scholes
option pricing model with dividends is:
C=S × e−dt × N(d1) − E × e−Rt × N(d2)C=S × e−dt × N(d1) − E × e−Rt × N(d2)
d1= [ln(S /E ) +(R−d+σ2 / 2) × t ] (σ − t√) d1= [ln(S /E ) +(R−d+σ2 / 2) × t ] (σ − t)
d2=d1−σ × t√d2=d1−σ × t
...
In addition to the five factors discussed in the chapter, dividends also affect the price of...
In addition to the five factors discussed in the chapter,
dividends also affect the price of an option. The Black-Scholes
option pricing model with dividends is:
C=S × e−dt × N(d1) − E × e−Rt × N(d2)
d1= [ln(S /E ) +(R−d+σ2 / 2) × t ] (σ − t√) d2=d1−σ × t√ All of
the variables are the same as the Black-Scholes model without
dividends except for the variable d, which is the continuously
compounded dividend yield on the...
Problem 17-30 Black–Scholes and Dividends In addition to the five factors discussed in the chapter, dividends...
Problem 17-30 Black–Scholes and Dividends
In addition to the five factors discussed in the chapter,
dividends also affect the price of an option. The Black–Scholes
option pricing model with dividends is:
C=S × e−dt × N(d1) − E × e−Rt × N(d2)C=S × e−dt × N(d1) − E × e−Rt × N(d2)
d1= [ln(S /E ) +(R−d+σ2 / 2) × t ] (σ − t√) d1= [ln(S /E ) +(R−d+σ2 / 2) × t ] (σ − t)
d2=d1−σ ...
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