The Black-Scholes model is used to value call options on the stock of National Co. The following information was identified: · The share price is P43. · The option matures in 6 months · The risk-free rate is 2%. · Price of the option is at P43. What is the exponent of “e” for in computing the value of the call option using the Black-Scholes model?
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The Black-Scholes model is used to value call options on the stock of National Co. The following information was identified:
· The share price is P43.
· The option matures in 6 months
· The risk-free rate is 2%.
· Price of the option is at P43.
What is the exponent of “e” for in computing the value of the call option using the Black-Scholes model?
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- The Black-Scholes model is used by Bulldogs Inc. to value call options on the stock of National Inc. The following information was determined by the analyst:· The share price is P30.· The price of the option is at P32.· The risk-free rate is 3%.· The option matures in 6 monthsIn the formula of the current value of the call option under the Black-Scholes model, what is the exponent of “e” be? -0.015 0.15 0.25 -0.055Consider shorting a call option c on a stock S where S = 24 is the value of the stock, K = 30 is the strike price, T = ½ is the expiration date, r = 0.04 is the continuously compounded interest rate per year, and = 0.3 is the volatility of the price of the stock. Determine the delta ratio Δ .In 1973, Fischer Black and Myron Scholes developed the Black-Scholes option pricing model (OPM). (1) What assumptions underlie the OPM? (2) Write out the three equations that constitute the model. (3) According to the OPM, what is the value of a call option with the following characteristics? Stock price = 27.00 Strike price = 25.00 Time to expiration = 6 months = 0.5 years Risk-free rate = 6.0% Stock return standard deviation = 0.49
- Which of the following is not a determinant of the value of a call option in the Black-Scholes model? A. The interest rate. B. The exercise price of the stock. C. The price of the underlying stock. D. The beta of the underlying stock. Need typed answer only.Please give answer within 45 minutesAssume that you hold a call option on stock A. The call has a strike price of 50 and expires in 6 months. Stock A pays no dividends. 1. What is the payoff from the call if stock A is trading at 57 in 6 months? 2. What is the payoff from the call if stock A is trading at 45 in 6 months? 3. Draw a payoff diagram that shows the payoff of the call as a function of the underlying stock price.Suppose that a June call option to buy a share for $65 costs $3.5 and is held until June. Under what circumstances will the holder of the option make profit Under what circumstances will the option be exercised? Draw a diagram showing how the profit on a long position in the option depends on the stock price at the maturity of the option.
- Suppose a put option is traded at $3. The underlying stock of the option is traded at $105 per share at the same time. The option expires in 3 months and has a strike price of $104. What is the intrinsic value of the option? Is the option in the money, at the money, or out of the money?Excel Online Structured Activity: Black-Scholes Model Assume the following inputs for a call option: (1) current stock price is $29, (2) strike price is $36, (3) time to expiration is 5 months, (4) annualized risk-free rate is 4%, and (5) variance of stock return is 0.31. Use the Black-Scholes model to find the price for the call option. Do not round intermediate calculations. Round your answer to the nearest cent.You are pricing options with the following characteristics: •Current stock price (St): $35.60 •Exercise price (X): $50 •Time to expiration (T-t): 9 months •Risk-free rate (rf): 3.25% •Volatility (0): 45% (a): What is the Black-Scholes value of call option? In your hand-written solution, provide the calculations of d1,d2, and the final call price. Use Excel or another spreadsheet program to compute the values of N(d1) and N(d2). See the notes for details. (b): Using put-call parity, what is the value of a put option? For this case, assume continuous compounding, which implies that PVt(X)=e-r(T-t).X.
- You are given the following information about the stock of Company ABC: Share price $80 risk free rate of interest is 6%, time to expiration is 6 months, annualised standard deviationis 0.5 and exercise price is $85. Calculate the appropriate call value of the stock according to the Black-Scholes option pricing formula. (Show your workings in full) Calculate an appropriate put premium. (Show your workings in full)Suppose that a call option with a strike price of $48 expires in one year and has a current market price of $5.17. The market price of the underlying stock is $46.25, and the risk-free rate is 1%. Use put-call parity to calculate the price of a put option on the same underlying stock with a strike of $48 and an expiration of one year. The price of a put option on the same underlying stock with a strike of $48 and an expiration of one year is $. (Round to the nearest cent.)A stock has a required return of 15%, the risk-free rate is 7.5%, and the market risk premium is 5%. a. What is the stock's beta? Round your answer to two decimal places. 0.85 b. If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. Do not round intermediate calculations. Round your answer to two decimal places. I. If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. II. If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium. III. If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk premium. IV. If the stock's beta is equal to 1.0, then the change in required rate of return will be less than the change in the market risk premium.…
