Using the Black/Scholes Option Pricing Model,calculate the value of the call option given:S = 70; X = 80; T = 3 months;= .49; Rf = 10%What is the intrinsic value of the call? What stockprice is necessary to break - even?

To calculate the value of the call option using the Black-Scholes Option Pricing Model, we need to…

Answered: Using the Black/Scholes Option Pricing…

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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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.
1. What is the fair value for a two-year American put option with a strike price of $85 over a stock which is trading at $86.15 which has a volatility of 37% when the risk free rate is 1.75% using the two step binomial tree? a) What is the delta of this option? b) What is the probability of a down movement in this stock? c) What is the probability of an up movement in this stock? d) What is the proportional move up for this stock e) What is the proportional move down for this stock f) What would be the value of the call option with the same strike price?
What is the put option premium given the following information? What would happen to the Put option premium if the risk-free rate significantly declined from its current level? Stock price $28.00 Strike price $35.00 Volatility 50% Dividend Yield 0.00 Time 0.50 Riskfree Rate 3.50%
Consider the following information: Put Premium: $0.46 Strike Price: $32.82 Price of the underlying at initiation: $35.00 Calculate the breakeven price on a protective put option strategy (The breakeven price is the price of the underlying that would lead to a profit of $0).
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Using the Black/Scholes Option Pricing Model, calculate the value of the call option given: S = 70; X = 80; T = 3 months; = .49; Rf = 10% What is the intrinsic value of the call? What stock price is necessary to break - even?