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Problem 1 6 - 0 6 Problem 1 6 - 0 6 Suppose the current value of a popular stock index is 6 5 1
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Suppose the current value of a popular stock index is and the dividend yield on the index is Also, the yield curve is flat at a continuously compounded rate of
a If you estimate the volatility factor for the index to be use the BlackScholes model to calculate the value of an index call option with an exercise price of and an expiration date in exactly three months. You may use Appendix D to answer the question. Do not round intermediate calculations. Round your answer to the nearest cent.
$
b If the actual market price of this option is $ calculate the implied volatility coefficient. Do not round intermediate calculations. Round your answer to two decimal places.
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