Question

4) A nine-month European call option is written on a stock that provides a continuous dividend yield of 4%; the strike price is $110, the risk-free rate is 2% and the stock's volatility is 30%. Assume that the stock is currently selling for $115. What is the price of the call?

Answer 1

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C w A ENG 00:26 30-07-2020 99+ 32 Х AN442 fic . AH AI AJ AK AL AM AN AO AP AQ AR 419 DIVIDEND CALL OPTION S= 115 K= 110 r= 0.02 0.04 6 = 0 = 0.3 0.750 (9/12) T = ILUUU 420 421 422 423 424 425 426 427 428 429 430 431 432 433 434 435 436 d, - ln (s/k) + (0-8+ 0.5(68) сут d1 = (In(115/110) + (0.02 -0.04+0.5*(0.3)^2)(0.75))/(0.3*(SQRT(0.75)) d1 = 0.2433 437 438 439 440 d2 = d1 - d2 = o* SQRT(T) -0.0165 441 0.5961 N(d1) = N(D2) = 442 0.4934 BULL SPREAD BINOMIAL BS gamma call put EXCEL HIG CALL EXCEL RISK NEUTRAL FLORIDA EX OPTI sd=0 COMPENSATION ZEVON S... +

C w A ENG 00:26 30-07-2020 99+ 32 Х AN463 fic . AH AI AJ AK AL AM AN AO AP AQ AR 440 0.5961 N(D1) = N(D2) = 0.4934 441 442 443 444 445 0.985112 e^(-0.02*(0.75)) = e^(-0.04*(0.75)) = 0.970446 a. 446 447 448 449 450 Value of call option - SCT) se c= (2) کہ . kie. N (dz) VALUE OF CALL = 115 *e^(-0.04*(0.75))*(0.5961) 66.53 110*e^(-0.02*(0.75))*(0.4934) 53.47 VALUE OF CALL = VALUE OF CALL = 13.06 451 452 453 454 455 456 457 458 459 460 461 462 463 BULL SPREAD BINOMIAL BS gamma call put EXCEL HIG CALL EXCEL RISK NEUTRAL FLORIDA EX OPTI sd=0 COMPENSATION ZEVON S... +