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4/16/2010 Chapter 8 Ch08 P08...




4/16/2010 Chapter 8 Ch08 P08 Build a Model You have been given the following information on a call option on the stock of Puckett Industries: P = $65 X = $70 t = 0.5 rRF = 5% s = 50.00% a. Using the Black-Scholes Option Pricing Model, what is the value of the call option? First, we will use formulas from the text to solve for d1 and d2. Hint: use the NORMSDIST function. (d1) = N(d1) = (d2) = N(d2) = Using the formula for option value and the values of N(d) from above, we can find the call option value. VC = b. Suppose there is a put option on Puckett's stock with exactly the same inputs as the call option. What is the value of the put? Put option using Black-Scholes modified formula = Put option using put-call parity =


Paper#4043 | Written in 18-Jul-2015

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