Options Solutions 7

# Options Solutions 7 - Assuming a risk-free rate of 4.00...

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Old Exam Problems - Options - Solutions Page 7 of 13 Pages d 1 = 0.160484801 / 0.178605442 + 0.089302721 = 0.987846453 = 0.99 N(d 1 ) = 0.8389 d 2 = 0.987846453 - 0.178605442 = 0.809241011 = 0.81 N(d 2 ) = 0.7910 Call Price = (\$52.00)*(0.8389) - (\$44.29)*(0.7910) Call Price = \$43.62 - \$35.03 = \$8.59 Checked Using the Excel Model : Stock Price = \$52.00 Exercise Price = \$45.00 PV (Exercise) = \$44.29 d 1 = 0.9884 N(d 1 ) = 0.8385 d 2 = 0.8098 N(d 2 ) = 0.7910 Call Price = \$8.57 Put = Call + Ee -r*t - S = \$8.57 + \$44.29 - \$52.00 = \$0.86 10. Assume that you have a call option with a strike (exercise) price of \$30, a current stock price of \$32, 73 days until expiration, and an annualized standard deviation of 32.42%.
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Unformatted text preview: Assuming a risk-free rate of 4.00 percent, you can calculate that the price of this call options is equal to \$3.07. Given this information, calculate the price of an equivalent put option (same parameters). (Take all preliminary numbers out to 9 decimal places.) A. \$0.92 B. \$1.04 * C. \$0.83 D. \$0.88 E. \$0.97 PV (Exercise) = (\$25.00)*e-(.04)*(73/365) = \$29.76 d 1 = {[ln(\$32.00/\$29.76)] / (.3242)*(73/365) 1/2 } + [(.3242)*(73/365) 1/2 / 2] d 1 = 0.072570693 / 0.144986648 + 0.072493324 = 0.573026952 = 0.57 N(d 1 ) = 0.7157 d 2 = 0.573026952 - 0.144986648 = 0.428040305 = 0.43 N(d 2 ) = 0.6664 Call Price = (\$32.00)*(0.7157) - (\$29.76)*(0.6664)...
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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.

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