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Unformatted text preview: * E. 2.33% Using put-call parity C = P + S - E / (1+r) t $1.75 = $2.00 + 75.00 - $77.00 / (1+r) -$75.25 = -77.00 / (1+r) (1+r) = -$77.00 / -$75.25 = 1.0232558 r = 2.33% 7. Assume that a share of stock has a current price of $60. Also assume that a call option on this stock has 1 year to maturity, a standard deviation of 0.20, an exercise price of $50, and that the appropriate 1-year interest rate is 4.00%. What is the price of this call option using the Black-Scholes option-pricing model? (A cumulative normal probability table is at the end of this exam -- you should round off your answers for d 1 and d 2 to two decimal places.) A. $12.04 B. $13.75 C. $14.19...
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.
- Spring '08