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##### Build a Model-Ch 08 P08

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Fall 1, 2012;Chapter 8. Ch 08 P08 Build a Model;Except for charts and answers that must be written, only Excel formulas that use cell references or functions will be accepted for credit.;Numeric answers in cells will not be accepted.;You have been given the following information on a call option on the stock of Puckett Industries;P = X =;t = r RF = e -rRFt =;s =;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 d 1 and d 2.;Hint: use the NORMSDIST function.;(d 1) = N(d 1) =;(d 2) = N(d 2) =;Using the formula for option value and the values of N(d) from above, we can find the call option value.;V C =;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#74091 | Written in 18-Jul-2015

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