Question

Use Black Scholes to Value the put and call given the following criteria. The stock price six months from the expiration of an option is $43.00, the exercise price of the option is $39, the risk free interest rate is 10 percent per annum, and the volatility is 20% per annum.  

A) c = 6.33, p = 0.43

B) c = 3.16, p = 1.06

C) c = 4.00, p = 1.90

Answer 1

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Answer : A) c= 6.33, p =0.43

- 2x m Find & Insert Delete Format Σ AutoSum : A Fill 2 Sort & 2 Clear Filter Editing Select Cells V W X Y Z DERIVATIVES BINOMIAL - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Calibri -11AA = = = Dr Wrap Text General Ea Copy Paste BI U D- DA E E E s FMerce Merge & Center - Center Format Painter $ % % , 4.0 .00 :.: Conditional Format Cell Formatting as Table Styles Clipboard Font Alignment Number Styles R82 Formula Bar 2 K L M N O P Q R form T U 82 83 43 K= 39 85 0.1 86 0 (A) = 0.2 0.5 (=6/12] 88 89 90 659 84 87 T = d. ln (5/6) + (rroso (1) 91 92 d1 = [In(43/39) + (0.1 +0.5*(0.2)^2)(0.5)]/(0.2*(SQRT(0.5)] d1 = 1.11467 93 94 95 96 d2 = d1 - 0* SQRT(T) d2 = 0.97325 e^(-0.1*0.5)= 0.951229 97 98 99 100 KOM Rea N(d1) = N(D2) = 0.867505 0.834786 Sheet2 RISK NEUTRAL Sheet3 Sheet4 Sheets Sheet6 Sheet7 BINOMIAL BS ferences 200 130% . * o 21:06 04-11-2019 DEB ENG

DERIVATIVES BINOMIAL - Microsoft Excel (Product Activation Failed) View Add-Ins File Home Insert Page Layout Formulas Data Review - 2x % Cut Calibri Dr General Wrap Text Merge Merge & Center Center m Find & B I SF $ - % % 4:0 .00 8. Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Σ AutoSum : A Fill 2 Sort & 2 Clear Filter Editing -11AA = = = U - D A Font foc м Select Alignment Number E Copy Paste Format Painter Clipboard T119 к 101 102 103 Cells RS LITU W Z VALUE OF CALL OPTION = n(d, - k.e . N(dz) 104 105 106 VALUE OF CALL OPTION = VALUE OF CALL OPTION = VALUE OF CALL OPTION = 107 43*(0.867505) 37.30 6.33 39*(0.951229)*(0.834786) 30.97 108 109 110 value of Put option 111 P = koe N(-dz) - 112 113 114 115 116 117 S. N(di) VALUE OF PUT OPTION = VALUE OF PUT OPTION = VALUE OF PUT OPTION = 39 *(0.951229)*(1-0.834786) 6.12911 0.43 43*(1-0.867505) 5.6973 118 119 R N Sheet2 RISK NEUTRAL Sheet3 Sheet4 Sheets Sheeto Sheet7 BINOMIAL BS ferences Red 200 130% * 1 o 21:00 S RO 9 ENG