CH8 Eoc
CH8 Eoc
price $20 cu $5
pu $26 cd $0
pd $16 u 1.3
rf 5% d 0.8
strike price $21 Ns 0.50
call payoff $8.00 $8.00
price call $7.61
Vc $2.39
P= $65 X= $70
t= 0.5 rRF = 5%
s= 0.50
a. Using the Black-Scholes Option Pricing Model, what is the value of the call option?
First, we will use formulas from the text to solve for d1 and d2.
Hint: use the NORMSDIST function.
(d1) = 0.038 N(d1) = 0.515107672
(d2) = -0.316 N(d2) = 0.376124596
Using the formula for option value and the values of N(d) from above, we can find the call option value.
VC = $7.803
b. Suppose there is a put option on Puckett's stock with exactly the same inputs as the call option. What is the value o