Use the Black-Scholes formula for the following stock: Time to expiration 6 months Standard deviation 60% per year Exercise price $57 Stock price $57 Annual interest rate 3% Dividend 0 Recalculate the value of the call with the following changes: a. Time to expiration 3 months b. Standard deviation 25% per year c. Exercise price $64 d. Stock price $64 e. Interest rate 6% Select each scenario independently. Note: Round your answers to 2 decimal places.
Use the Black-Scholes formula for the following stock: Time to expiration 6 months Standard deviation 60% per year Exercise price $57 Stock price $57 Annual interest rate 3% Dividend 0 Recalculate the value of the call with the following changes: a. Time to expiration 3 months b. Standard deviation 25% per year c. Exercise price $64 d. Stock price $64 e. Interest rate 6% Select each scenario independently. Note: Round your answers to 2 decimal places.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Use the Black-Scholes formula for the following stock:
| Time to expiration | 6 months |
|---|---|
| Standard deviation | 60% per year |
| Exercise price | $57 |
| Stock price | $57 |
| Annual interest rate | 3% |
| Dividend | 0 |
Recalculate the value of the call with the following changes:
| a. Time to expiration | 3 months |
|---|---|
| b. Standard deviation | 25% per year |
| c. Exercise price | $64 |
| d. Stock price | $64 |
| e. Interest rate | 6% |
Select each scenario independently.
Note: Round your answers to 2 decimal places.
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