(1)Using the Black Scholes Option Pricing Model, calculate the value of Call and Put Options for a stock with the following information. Use the Power Point presentation along with the Standard Normal Distribution Table given to you from presentation to you on this topic. Show all your work.

Inputs:

Risk free rate = rfr = 0.10 or 10%

Time to maturity (by days in year) = (T) = 50/365

Exercise Price (X) = $40

Standard deviation (σ) = 0.23

Stock Price (S) = $42

Guidelines for Using the Standard Normal Distribution Table and Rounding the Numbers

1) With rounding in this venue, the protocol is to calculate out to four digits. For example, assume you have rounded your calculation so that d1 = 0.3767.

2) Next, you round 0.3767 to 0.38, and the corresponding N(d1) = 0.6480.

Another helpful hint or guideline: One more thing: if you ended up with d1 = 0.3749, PLEASE DO NOT convert that into 0.375 and then round to 0.38. Instead, the d1 would be rounded to 0.37.

This problem and the Standard Normal Distribution Table are both taken from a CFA preparatory text along with the aforementioned guidelines

Inputs:

Risk free rate = rfr = 0.10 or 10%

Time to maturity (by days in year) = (T) = 50/365

Exercise Price (X) = $40

Standard deviation (σ) = 0.23

Stock Price (S) = $42

Guidelines for Using the Standard Normal Distribution Table and Rounding the Numbers

1) With rounding in this venue, the protocol is to calculate out to four digits. For example, assume you have rounded your calculation so that d1 = 0.3767.

2) Next, you round 0.3767 to 0.38, and the corresponding N(d1) = 0.6480.

Another helpful hint or guideline: One more thing: if you ended up with d1 = 0.3749, PLEASE DO NOT convert that into 0.375 and then round to 0.38. Instead, the d1 would be rounded to 0.37.

This problem and the Standard Normal Distribution Table are both taken from a CFA preparatory text along with the aforementioned guidelines

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