Question
A stock is selling today for $90. The stock has an annual volatility of 52 percent and the annual risk-free interest rate is 11 percent.
A stock is selling today for $90. The stock has an annual volatility of 52 percent and the annual risk-free interest rate is 11 percent. A 8 month European call option with an exercise price of $96 is available to an investor. a. Use Excels data table feature to construct a Two-Way Data Table to demonstrate the impact of the exercise price and the options duration on the price of this call option: i. Option durations of 5 months, 10 months, 15 months, and 20 months. ii. Exercise prices of $88, $92, $96, $100 and $104. b. How is the call option price impacted by varying the exercise price? c. How is the call option price impacted by varying the duration of the option?
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