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please show formulas You have been given the following information on a call option on the stock of Puckett Industries: P = $65 X =
please show formulas
You have been given the following information on a call option on the stock of Puckett Industries: | ||||||||
P = | $65 | X = | $70 | |||||
t = | 0.5 | rRF= | 5% | |||||
s = | 0.50 | |||||||
a. Using the Black-Scholes Option Pricing Model, what is the value of the call option? | ||||||||
First, we will use formulas from the text to solve for d1and d2. | ||||||||
Hint: use the NORMSDIST function. | ||||||||
(d1) | = | N(d1) = | ||||||
(d2) | = | N(d2) = | ||||||
Using the formula for option value and the values of N(d) from above, we can find the call option value. | ||||||||
VC | = |
b. Suppose there is a put option on Puckett's stock with exactly the same inputs as the call option. What is the value of the put? | |||||||||
Put option using Black-Scholes modified formula | = | ||||||||
Put option using put-call parity | = |
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