Question
Consider the following data for a certain share. Current Price = S 0 = Rs. 80 Exercise Price = E = Rs. 90 Standard deviation
Consider the following data for a certain share.
Current Price = S0 = Rs. 80
Exercise Price = E = Rs. 90
Standard deviation of continuously compounded annual return = = 0.5
Expiration period of the call option = 3 months
Risk – free interest rate per annum = 6 percent
a. What is the value of the call option? Use the normal distribution table.
b. What is the value of a put option?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To calculate the value of the call option we can use the BlackScholes model which considers factors ...
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Introduction to Financial Accounting
Authors: Charles Horngren, Gary Sundem, John Elliott, Donna Philbrick
11th edition
978-0133251111, 013325111X, 0133251039, 978-0133251036
