Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The options on the stock of the Shell Berhad have the following input values: Stock price = RM55 Strike price = RM52 Risk-free rate =

The options on the stock of the Shell Berhad have the following input values:

Stock price = RM55

Strike price = RM52

Risk-free rate = 0.10

Standard deviation = 0.33

Time to maturity = 0.4

(Assume that no dividends are currently being paid and use BSOPM model)

If risk-free rate rises to 0.12, determine the price of a call on shell's stock if the other inputs do not change. Assume no dividends.

a.

RM7.90

b.

RM7.25

c.

RM7.61

d.

RM6.80

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Shape Up Your Finances

Authors: Ian Birt

2nd Edition

1925716422, 978-1925716429

More Books

Students also viewed these Finance questions

Question

c. What were you expected to do when you grew up?

Answered: 1 week ago