The stocks of Cee Mobile Limited is currently trading at $73 each. The call option on the company’s stock has an exercise price of $70, with fifty (50) days remaining to expiration. It is assumed that the yield on treasury bills is currently 2%, while the volatility of the stock price is estimated as being 35%. a. Using the Black-Scholes-Merton (BSM) model, calculate the value of the Call option, given the above parameters. Show all relevant workings. b. Of the value computed, how much is the intrinsic value and the time value of the Call option? c. Using the BSM model and the information given above, calculate the value of the Put option on the stock, with a similar strike price and days to expiration.
The stocks of Cee Mobile Limited is currently trading at $73 each. The call option on the company’s stock has an exercise price of $70, with fifty (50) days remaining to expiration. It is assumed that the yield on treasury bills is currently 2%, while the volatility of the stock price is estimated as being 35%.
a. Using the Black-Scholes-Merton (BSM) model, calculate the value of the Call option, given the above parameters. Show all relevant workings.
b. Of the value computed, how much is the intrinsic value and the time value of the Call option?
c. Using the BSM model and the information given above, calculate the value of the Put option on the stock, with a similar strike price and days to expiration.
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