Consider a stock priced at 100 with volatility of 25 percent. The continuously compounded risk-free rate is

Question:

Consider a stock priced at 100 with volatility of 25 percent. The continuously compounded risk-free rate is 5 percent. Answer the following questions about various options, all of which have an original of one year.
a. Find the premium on an at-the-money pay-later call option. Then determine the market value of the option nine months later if the stock is at 110.
b. Find the value of F and K on a break forward contract. Then determine the market value of the break forward nine months later if the stock is at 110.
c. Find the premium on an at-the-money contingent-pay call option. Then determine the market value of the option nine months later if the stock is at 110? Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...