Question
A share price index is currently trading at 3256. You own a European call option on the index at a strike price of 3300 with
A share price index is currently trading at 3256. You own a European call option on the index at a strike price of 3300 with expiry in 6 months. The risk free rate of interest (continuously compounded) is 4% per annum and the dividend yield on the index is estimated to be 3% per annum (continuously compounded). The volatility of the index has been estimated to be 14% per annum. An equivalent European put option (same strike and maturity) is trading at 141.20 index points.
The value of your call option is given by
Select one:
141.20 + 3256e-0.030.5 - 3300
141.20 + 3256e-0.040.5 - 3300e-0.030.5
141.20 + 3256 - 3300e-0.040.5
141.20 + 3256e-0.030.5 - 3300e-0.040.5
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