FREE Trial

What is the value of a call option if the underlying stock price is $84, the strike

Question:

What is the value of a call option if the underlying stock price is $84, the strike price is $80, the underlying stock volatility is 42 percent, and the risk-free rate is 4 percent? Assume the option has 135 days to expiration.

Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Answer rating: 54% (11 reviews)

The standard normal probabilities are Nd 1 646...View the full answer


answer-question-section
Answered By
tutor-profile-image
Branice Buyengo Ajevi
I have been teaching for the last 5 years which has strengthened my interaction with students of different level.
4.30+ 1+ Reviews 10+ Question Solved
Related Book For  book-img-for-question
Fundamentals of Investments, Valuation and Management

Fundamentals of Investments, Valuation and Management

ISBN: 978-1259720697

8th edition

Authors: Bradford Jordan, Thomas Miller, Steve Dolvin

See More Books
Question Posted:
See More Questions

Related Video

A call option is a type of financial contract that gives the holder the right, but not the obligation, to buy an underlying asset (such as a stock, commodity, or currency) at a specified price (called the strike price) within a specified period of time. When an investor purchases a call option, they are essentially betting that the price of the underlying asset will rise above the strike price before the option\'s expiration date. If the price of the asset does rise above the strike price, the investor can exercise the option by buying the asset at the strike price and then selling it at the higher market price, thereby earning a profit. Call options are often used as a speculative investment strategy, as they allow investors to potentially profit from the upward movement of an asset without having to actually own the asset itself. They are also commonly used as a hedging tool to protect against potential losses in a portfolio.

Students also viewed these Business questions

Vocabulary For Champions Over 2 000 Words And Activities To Improve Your Reading Writing Speaking Test Taking And Resume Building Skills 1st Edition - ISBN: 0970973438 - Free Book