• 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.
Given this information, the analyst is then able to calculate some other necessary components of the Black-Scholes model:
• d1 = 0.175
• d2 = -0.025
• N(d1) = 0.56946
• N(d2) = 0.49003
N(d1) and N(d2) represent areas under a standard normal distribution function. Using the Black-Scholes model, what is the value of the call option?
Recently Asked Questions
- U.S. Steel is considering a plant expansion to produce austenitic, precipitation hardened, duplex, and martensitic stainless steel round bars that is expected
- I need help please How did war in the modern era affect literature?
- Please refer to the attachment to answer this question. This question was created from Problem Set 1 (non-online version).