Solution-
The table showing important parameters is-
Type of Option | Call Option |
Stock Price (S0) | $ 100.00 |
Exercise (Strike) Price (K) | $ 110.00 |
Time to Maturity (in years) (t) | 1.00 |
Annual Risk Free Rate (r) | 7.00% |
Annualized Volatility (σ) | 16.90% |
Now, we compute different parameters to use black scholes formula and its components (In Excel) as follows -
ln(S0/K) | (0.095) |
(r+σ2/2)t | 0.084 |
σ√t | 0.169 |
d1 | (0.065) |
d2 | (0.234) |
N(d1) | 0.474 |
N(d2) | 0.407 |
N(-d1) | 0.526 |
N(-d2) | 0.593 |
e-rt | 0.93239 |
Putting these in formula gives us-
Option Price | $ 5.62 |
Answer
Thanks!
Sheet showing formula is also attached below for your reference-
Type of Option | Call Option |
Stock Price (S0) | 100 |
Exercise (Strike) Price (K) | 110 |
Time to Maturity (in years) (t) | 1 |
Annual Risk Free Rate (r) | 0.07 |
Annualized Volatility (σ) | 0.169014 |
Option Price | =IFERROR(IF(C4='--> Additional Info'!A3,C5*C18-C6*C22*C19,IF(C4='--> Additional Info'!A4,C6*C22*C21-C5*C20,"na")),"na") |
Additional Calculation Parameters | |
ln(S0/K) | =IFERROR(LN(C5/C6),"na") |
(r+σ2/2)t | =(C8+(C9^2)/2)*C7 |
σ√t | =C9*SQRT(C7) |
d1 | =IFERROR((C13+C14)/C15,"na") |
d2 | =IFERROR(C16-C15,"na") |
N(d1) | =IFERROR(NORM.S.DIST(C16,TRUE),"na") |
N(d2) | =IFERROR(NORM.S.DIST(C17,TRUE),"na") |
N(-d1) | =IFERROR(NORM.S.DIST(-C16,TRUE),"na") |
N(-d2) | =IFERROR(NORM.S.DIST(-C17,TRUE),"na") |
e-rt | =EXP(-C8*C7) |
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