Question
Rebecca is interested in purchasing a European call on a hot new stock, Up, Inc. The call has a strike price of $99.00 and expires
Rebecca is interested in purchasing a European call on a hot new stock, Up, Inc. The call has a strike price of $99.00
and expires in 93 days. The current price of Up stock is $117.18, and the stock has a standard deviation of 42%
per year. The risk-free interest rate is 6.85% per year. Up stock pays no dividends. Use a 365-day 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.
(Note:
Make sure to round all intermediate calculations to at least five decimal
places.)
a. Using the Black-Scholes formula, compute the price of the call.
The price of the call is $enter your response here.
(Round to two decimal places.)
b. Use put-call parity to compute the price of the put with the same strike and expiration date.
The price of the put is $enter your response here.
(Round to two decimal places.)
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