Question
A call option on a stock has elasticity of 3.4. The continuously compounded risk-free rate is 3.3% and the Black-Scholes price volatility of the stock
A call option on a stock has elasticity of 3.4. The continuously compounded risk-free rate is 3.3% and the Black-Scholes price volatility of the stock is 0.11. Suppose that the risk premium on the stock is 77% of the stock volatility. Find the expected annual continuously compounded return on the option. (the answer should be 0.32098)
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American Public School Finance
Authors: William Owings, Leslie Kaplan
2nd Edition
1111838046, 978-1111838041
