Use the Black-Scholes formula for the following stock:Time to expirationStandard deviationExercise price6 months54% per year$54Stock price$54Annual interest rate4%0DividendRecalculate the value of the call with the following changes:a. Time to expiration.b. Standard deviation3 monthsc. Exercise priced. Stock price20% per year$60$606%e. Interest rateSelect each scenario independently.Note: Round your answers to 2 decimal places.Value of theCall Optiona.C falls tob. C falls toC.C falls tod. C rises toe.C rises to

d. Stock Price ($60):As the stock price increases closer to or above the exercise price, the call…

Answered: Use the Black-Scholes formula for the…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 5P

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Consider shorting a call option c on a stock S where S = 24 is the value of the stock, K = 30 is the strike price, T = ½ is the expiration date, r = 0.04 is the continuously compounded interest rate per year, and  = 0.3 is the volatility of the price of the stock. Determine the delta ratio Δ .
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