You are given the following information on some company's stock, as well as the risk-free asset. Use it to calculate the price of the call option written on that stock, as well asthe price of the put option. (HINT: You should use the Black-Scholes formula!) (Do notround intermediate calculations and round your final answers to 2 decimal places,e.g., 32.16.)Today's stock= $74priceExercise price = $70Risk-free rate =Option maturity = 4 monthsStandarddeviation ofannual stockreturns4.4% per year, compoundedcontinuouslyCall pricePut price= 62% per year

Answered: free asset. Use it to calculate the…

free asset. Use it to calculate the price of the call option written on that stock, as well as the price of the put option. (HINT: You should use the Black-Scholes formula!) (Do not

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

You are given the following information on some company's stock, as well as the risk-
free asset. Use it to calculate the price of the call option written on that stock, as well as
the price of the put option. (HINT: You should use the Black-Scholes formula!) (Do not
round intermediate calculations and round your final answers to 2 decimal places,
e.g., 32.16.)
Today's stock
= $74
price
Exercise price = $70
Risk-free rate =
Option maturity = 4 months
Standard
deviation of
annual stock
returns
4.4% per year, compounded
continuously
Call price
Put price
= 62% per year

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