fm9 2 - RF = 0.06; 2 = 0.12; d 1 = 0.24495; d 2 = 0.0000;...

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Answers and Solutions: 9 - 2 SOLUTIONS TO END-OF-CHAPTER PROBLEMS 9-1 Exercise value = Current stock price – strike price = $30 - $25 = $5. Time value = Option price – Exercise value = $7 - $5 = $2. 9-2 Option’s strike price = $15; Exercise value = $22; Time value = $5; V = ? P 0 = ? Time Value = Market price of option - Exercise value $5 = V - $22 V = $27. Exercise value = P 0 - Strike price $22 = P 0 - $15 P 0 = $37. 9-3 P = $15; X = $15; t = 0.5; r
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Unformatted text preview: RF = 0.06; 2 = 0.12; d 1 = 0.24495; d 2 = 0.0000; N(d 1 ) = 0.59675; N(d 2 ) = 0.500000; V = ? Using the Black-Scholes Option Pricing Model, you calculate the options value as: V = P[N(d 1 )] - t r RF Xe [N(d 2 )] = $15(0.59675) - $15e (-0.06)(0.5) (0.50000) = $8.95128 - $15(0.9512)(0.50000) = $1.6729 $1.67. 9-4 Put = V P + X exp(-r RF t) = $6.56 - $33 + $32 e-0.06(1) = $6.56 - $33 + $30.136 = $3.696 $3.70....
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