If the stock rises exactly as you expect, but it takes 10 weeks, what is the gain on your options trade as a percent (or decimal)?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter20: Financing With Derivatives
Section20.A: The Black-scholes Option Pricing Model
Problem 1P
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You purchase a call option for $6.48 with 20 weeks to expiration on a stock you expect to
increase 40.00%. The strike price of the option is $67.50
The stock is currently priced at $67.50. Its standard deviation is 36.00%
It pays a 0.00% dividend. The risk-free rate is 4.00%
If the stock rises exactly as you expect, but it takes 10 weeks, what is the gain on your
options trade as a percent (or decimal)?
Use these values as a part of your calc's:
N(d1) 0.98806
N(D2) 0.98218
O 339.46%
O 309.34%
362.74%
325.62%
O 378.37%
Transcribed Image Text:You purchase a call option for $6.48 with 20 weeks to expiration on a stock you expect to increase 40.00%. The strike price of the option is $67.50 The stock is currently priced at $67.50. Its standard deviation is 36.00% It pays a 0.00% dividend. The risk-free rate is 4.00% If the stock rises exactly as you expect, but it takes 10 weeks, what is the gain on your options trade as a percent (or decimal)? Use these values as a part of your calc's: N(d1) 0.98806 N(D2) 0.98218 O 339.46% O 309.34% 362.74% 325.62% O 378.37%
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