Consider a stock selling for $100, with volatility (standard deviation) of 30% per year. The stock...

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Consider a stock selling for $100, with volatility (standard deviation) of 30% per year. The stock...

Consider a stock selling for $100, with volatility (standard deviation) of 30% per year. The stock pays no dividends. The risk-free continuously compounded interest rate is 4%. What is the Black-Scholes value of a call option on this stock with strike price 95 and 3-month maturity?

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Answer 1

Answer #1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

120 . A B с F G $100.00 0.25 30.00% $95 4% TRF Using the Black Scholes formula: (dl) = 0.4836 N(d1) 0.6857 (d2) = 0.3336 N(D2

Cell reference -

A B C D F G 95 FNM + O 100 =3/12 0.3 PRE 0.04 Using the Black Scholes formula: (d1) =(LN(D2/G2)+(G3+D4^2/2)*D3)/(D4*SQRT(13))

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.

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Answer 2

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