Use the Black-Scholes formula for the following stock: Time to expiration 6 months Standard deviation 50% per year Exercise price $50 Stock price $50 Annual interest rate 3% Dividend 0 Calculate the value of a put option

Use the Black-Scholes formula for the following stock: Time to expiration 6 months Standard deviation 50% per year Exercise price $50 Stock price $50 Annual interest rate 3% Dividend 0 Calculate the value of a put option

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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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

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Question A
.Use the Black-Scholes formula for the following stock:

Time to expiration	6 months
Standard deviation	50% per year
Exercise price	$50
Stock price	$50
Annual interest rate	3%
Dividend	0

Calculate the value of a put option

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