Question
3. (5 points) Using the Black/Scholes Option Pricing Model, calculate the value of the call option given: S= 85; X=95; T=6 months; =.6; Rf=10% (1
3. (5 points) Using the Black/Scholes Option Pricing Model, calculate the value of the call option given: S= 85; X=95; T=6 months; =.6; Rf=10% (1 pt)
What is the intrinsic value of the call?_____________
If the exercise price would decrease, the value of the call would ___________?
If the time to maturity were 3-months instead of six months, the value of the call would ___________?
If the stock price where $65, the value of the call would ___________?
What is the maximum value that a call can take? Why?
What is the minimum value that a call can take? Why?
What increase in price does the stock have to achieve in order to break-even? ___________
What is the time value of the call option?____________
If you buy a bottom-straddle what strategy are you trying to use?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started