Question
Consider the following information for Muggie corporation. Mega Company stock price = K 20 Exercise price = K 15 3-month Risk Free Rate = 6%
Consider the following information for Muggie corporation.
Mega Company stock price = K 20
Exercise price = K 15
3-month Risk Free Rate = 6%
Call maturity = 90 days
Stock volatility = 0.50
Required:
a. What are the assumptions for the Black Scholes Option Pricing Model and their implications?
b. What is the fair value of Muggies Call option using the Black Scholes Option pricing model?
c. Using the PUT-CALL PARITY relationship, determine the price of the put option.
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Mission Ready Finances Proven Principles To Guide Your Story To Financial Freedom
Authors: Marco Parzych
1st Edition
173321531X, 978-1733215312
