Question
You are given the following information concerning options on a particular stock: Stock price = $42 Exercise price = $40 Risk-free rate = 7% per
| You are given the following information concerning options on a particular stock: |
| Stock price | = | $42 |
| Exercise price | = | $40 |
| Risk-free rate | = | 7% per year, compounded continuously |
| Maturity | = | 6 months |
| Standard deviation | = | 40% per year |
| a. | What is the intrinsic value of each option? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations.) |
| Value | |
| Call option | $ |
| Put option | $ |
| b. | What is the time value of each option? (Do not round intermediate calculations and round your final answers to 2 decimal places (e.g., 32.16).) |
| Value | |
| Call option | $ |
| Put option | $ |
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Capital Market Finance
Authors: Patrice Poncet, Roland Portait, Igor Toder
1st Edition
3030845982, 978-3030845988
