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.

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.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 5P

See similar textbooks

Similar questions

Assume the following inputs for a call option: (1) current stock price is $31, (2) strike price is $35, (3) time to expiration is 2 months, (4) annualized risk-free rate is 3%, and (5) variance of stock return is 0.25. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. 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.
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 $35, (3) time to expiration is 4 months, (4) annualized risk-free rate is 4%, and (5) variance of stock return is 0.32. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Black-Scholes Model Current price of underlying stock, P $29.00 Strike price of the option, X $35.00 Number of months unitl expiration 4 Formulas Time until the option expires, t #N/A Risk-free rate, rRF 4.00% Variance, \sigma 2 0.32 d1 = #N/A N(d1) = 0.5000 d2 = #N/A N(d2) = 0.5000 VC = #N/A 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. $ fill in the blank.
Black-Scholes Model Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $32, (2) strike price is $37, (3) time to expiration is 3 months, (4) annualized risk-free rate is 7%, and (5) variance of stock return is 0.16. Do not round intermediate calculations. Round your answer to the nearest cent.
You want to estimate the monthly alpha and beta of AXON stock, using the index model. Suppose AXON has a beta of 0.95 and a monthly alpha of 0.5 (representing half a percent). If you set up the regression model correctly, the index model equation should be (remember in index model formulas, we use R instead of r to denote excess returns): Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. b с d Rmarket = Rmarket = 0.5 x Rstock +0.95 Raxon 0.95 x Rstock +0.5 = 0.5 x Rmarket +0.95 Raxon = 0.95 x Rmarket +0.5
Assume the following inputs for a call option: (1) current stock price is $25, (2) strike price is $28, (3) time to expiration is 4 months, (4) annualized risk-free rate is 5%, and (5) variance of stock return is 0.33. 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 evaluating a put option based on the following information: P = Ke-H•N(-d,) – S-N(-d,) Stock price, So Exercise price, k = RM 11 = RM 10 = 0.10 Maturity, T= 90 days = 0.25 Standard deviation, o = 0.5 Interest rate, r Calculate the fair value of the put based on Black-Scholes pricing model. Cumulative normal distribution table is provided at the back.
1) Draw the binomial tree listing only the option prices at each node. Assume the following data on a 6-month call option, using 3-month intervals as the time period. K = $40, S = $37.90, r = 5.0%, σ = 0.35 2) Draw the binomial tree listing only the stock prices at each node. Assume the following data on a 6-month call option, using 3-month intervals as the time period. K = $70, S = $68.50, r = 6.0%, σ = 0.32 3) Draw the binomial tree listing only the option prices at each node. Assume the following data on a 6-month put option, using 3-month intervals as the time period. K = $40.00, S = $37.90, r = 5.0%, σ = 0.35 4) Using a binomial tree explanation, explain the situation in which an American option would alter the pricing of an option.
Suppose you have the following information concerning a particular options.Stock price, S = RM 21Exercise price, K = RM 20Interest rate, r = 0.08Maturity, T = 180 days = 0.5Standard deviation,= 0.5 a. What is correct of the call options using Black-Scholes model? * Look for N(d1) and N(d2) from the cumulative standard normal distribution table:
Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $32, (2) strike price is $37, (3) time to expiration is 3 months, (4) annualized risk-free rate is 6%, and (5) variance of stock return is 0.25. Do not round intermediate calculations. Round your answer to the nearest cent.
Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $30, (2) strike price is $38, (3) time to expiration is 7 months, (4) annualized risk-free rate is 5%, and (5) variance of stock return is 0.36.
Call options on a stock are available with strike prices of $15, $17.5 and $20 before expiration date. The call premiums for each are $4, $2 and $0.5 respectively. Explain how the options can be used to create a butterfly spread. A. Construct a table showing how profit varies with stock price for the butterfly spread. B. Plot the profit with stock price for the butterfly spread. List the profit formula for each trend.
Using the CAPM, estimate the appropriate required rate of return for the three stocks listed here, given that the risk-free rate is 4 percent and the expected return for the market is 17 percent. STOCK BETA A 0.63 B 0.95 C 1.48 a. Using the CAPM, the required rate of return for stock A is B.Using the CAPM, the required rate of return for stock b is C.Using the CAPM, the required rate of return for stock C is (Round to two decimal places.)