Question
PLEASE CONFIRM THE TYPE OF CALCULATOR USED THE CALCULATE THE FOLLOWING BLACK-SCHOLES FORMULA QUESTION? You want to know value of the an option to purchase
PLEASE CONFIRM THE TYPE OF CALCULATOR USED THE CALCULATE THE FOLLOWING BLACK-SCHOLES FORMULA QUESTION?
You want to know value of the an option to purchase one share NepalLiver Ltd. Stock for Rs95. Current price or shares is Rs100, and the option expires in three months (one year). Assuming that the stock pays no dividends, the standard deviation of the stock returns is 50% per year and the risk-free rate is 10% per year, we can calculate that the value of the option even though it is out of the money right now is as follows:
d1= [ln (100/95) + (.10+.52/2).25]/.5 .25=.43
d2 = .43 - . 5 .25 = .18
N (.43) = .6664
N (.18) = .5714
The value of the call option is:
C0 = 100 x .6664 95e - .10 x.25 x.5714 = 66.64 -52.94 = Rs13.70
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