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options 5

# options 5 - \$27 or \$17 and that the annual risk-free rate...

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Old Exam Problems - Options Page 5 of 5 Pages 15. Assume that an analyst is interested in using the Black-Scholes model to value call options on the stock of your company, and that the analyst has accumulated the following information: The price of the stock is \$40 The strike price is \$40 The option matures in 3 months (t = 0.25) The standard deviation of the stock’s returns is 0.40 and the variance is 0.16 The risk-free rate is 6 percent Using the Black-Scholes model, determine the value of the call option. A. \$0.60 B. \$3.17 C. \$4.20 D. \$8.00 E. \$3.47 16. Assume that the current price of a stock is \$22, that in one year the price will be either
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Unformatted text preview: \$27 or \$17, and that the annual risk-free rate is 6 percent. Given this information, determine the price of a call option on the stock that has an exercise price of \$22 and that expires in one year. A. \$0.98 B. \$1.98 C. \$2.98 D. \$3.98 E. \$4.98 17. The current price of a stock is \$50 and the annual risk-free rate is 6 percent. A call option with an exercise price of \$55 and one year until expiration has a current value of \$7.20. Using the concept of put-call parity, determine the value of a put option written on the stock with the same exercise price and expiration date as the call option. A. \$5.00 B. \$6.00 C. \$7.00 D. \$8.00 E. \$9.00...
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