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Question 6 [ 6 marks ] Consider Barrack Industries, for which the following financial data is provided: Current Share Price: R 1 5 0 Strike
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Consider Barrack Industries, for which the following financial data is provided:
Current Share Price: R
Strike Price of the Option: R
RiskFree Rate:
Variance of Share Returns:
a Use the given data to calculate the values of d and d using the BlackScholes model. Please detail your calculations for full credit.
b Given that Nd and Nd calculate the value of a European call option on Barrack Industries' shares. Clearly state any assumptions you make and explain how they affect the option's value.
Hint: The BlackScholes model requires the assumption of European options which can only be exercised at expiration no dividends, constant riskfree interest rate, and lognormal distribution of asset prices.
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