The excess, if any, of the S&P 500 index value over the initial (exercise) value of the index times some determined multiplier.

The exercise price of the call option and the multiplier were fixed at 270.38 and 3.6985. The multiplier represents the number of call options on the S&P 500 index that the investor receives for every $1,000 in bond principal held. The option is European type.

SPIN = Bond + (Call option × Multiplier)

Yield on comparable bonds = 8 percent per annum S&P 500 price volatility = 18.4 percent per annum X = 270.38 r = risk free rate = 6.5 percent S = current value of the S&P 500 index, adjusted for the present value of the expected dividends over the remaining life of the option Dividend on S&P 500 index = $8.28 Estimated average annual growth in dividends = 5.4 percent Current value of S&P index = 250 Estimate the value of SPIN. Use the Black–Scholes dividend adjusted model, to calculate the value of call option.