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Corporate Finance: CHAPTER 21 Option Valuation Rebecca is interested in purchasing a European call on a hot new stock, Up, Inc. The call has a

Corporate Finance: CHAPTER 21 Option Valuation

Rebecca is interested in purchasing a European call on a hot new stock, Up, Inc. The call has a strike price of $100 and expires in 90 days. The current price of Up stock is $120, and the stock has a standard deviation of 40% per year. The risk-free interest rate is 6.18% per year.

  • a.Using the Black-Scholes formula, compute the price of the call.
  • b.Use put-call parity to compute the price of the put with the same strike and expiration date.

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