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Start with the partial model in the file Ch08 P08 Build a Model.xls on the textbook?s Web site. You have been given the following information
Start with the partial model in the file Ch08 P08 Build a Model.xls on the textbook?s Web site. You have been given the following information for a call option on the stock of Puckett Industries: P = $65.00, X = $70.00, t = 0.50, rRF = 5.00% and ? = 50.00%. a. Use the Black-Scholes option-pricing model to determine the value of the call option. 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?
A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 B C D E F G H I J 4/16/2010 Chapter 8 Ch08 P08 Build a Model You have been given the following information on a call option on the stock of Puckett Industries: P= $65 t= s = 0.5 50.00% X= rRF = $70 5% 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 d1 and 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 =Step by Step Solution
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