BSM model. Mars Corp. common shares aretrading at $46 on the market. Currently, thecontinuously compounded risk - free rate is 9% peryear and the annual standard deviation of thecontinuously compounded rate of return on Marsshares is 16%. There are put and call options onMars common shares with an exercise price of $48and a 180-day expiry date? Using the Black-Scholes option pricing model, calculate thefollowing: Notes: 1. The cumulative standardnormal table is available on Moodle. 2. Use fullaccuracy in all the calculations excep for finding N(d1,2) These values are supposed to come fromthe table, which has 2 decimals accuracy. Thus, ifyou are using Excel you must round the argumentsof d1,2 to 2 decimals, and N(d1, 2) to 4 decimals. a.What is the value of d1 ? Number Round youranswer to two decimal places. b. What is the valueof call delta? Number Round your answer to fourdecimal places. c. What is the value of the calloption? $ Number Round your answer to twodecimal places. d. What is the value of the putoption?

Black-Scholes Model Calculations for Mars Corp. Options (with approximations)Given:Stock Price (S) =…

Answered: BSM model. Mars Corp. common shares are…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You are given the following information about the stock of Company ABC: Share price $80 risk free rate of interest is 6%, time to expiration is 6 months, annualised standard deviationis 0.5 and exercise price is $85. Calculate the appropriate call value of the stock according to the Black-Scholes option pricing formula. (Show your workings in full) Calculate an appropriate put premium. (Show your workings in full)
The Moon company currently sells for 100 $. The annual stock price volatility is %10 and risk- free interest rate %8, the price of a call on a company’s stock with strike price 200 $ and time period 2 months. Find the stock option price with Black and Scholes Model. If option market value 320 $ what is the option strategy?
The Black-Scholes model is used by Blue Co. to value call options of the stock of Gold Inc. The following information was determined:· The share price is P40.· The option matures in 1 year· Risk-free rate is 2.50%.· d1 = 0.70· d2 = 0.30The variance of the rate of return of the share is(in decimal)
J-Rata Corp shares are currently trading at $30 each. It is expected to increase by 10% or decrease by 6% during the next two-three months. If its strike price at maturity in six months is set as $32 and the risk free rate is 8% per annum for all maturities: (a) Calculate its call options price and its put option price currently (b)Test and prove that the put-call parity is holding based on your option pricing.
The Black-Scholes model is used to value call options on the stock of National Co. The following information was identified:· The share price is P43.· The option matures in 6 months· The risk-free rate is 2%.· Price of the option is at P43.What is the exponent of “e” for in computing the value of the call option using the Black-Scholes model?
The Black-Scholes model is used by Blue Co. to value call options of the stock of Gold Inc. The following information was determined: The share price is P40. The option matures in 1 year Risk-free rate is 2.50%. d1 = 0.70 %3D d2 = 0.30 %3D The variance of the rate of return of the share is (in decimal)
Market Data Risk-Free Rate (Annualized) 0.025 Vokinar Corporation Stock Price $55.00 Dividend Yield 0.03 Standard Deviation 0.45 Exercise Price $50.00 Maturity (Years) 0.25 Required: Using the Black-Scholes option pricing formula and the data above, please calculate the price of the European call and put for this share of stock. (Use cells A3 to B10 from the given information to complete this question.) Vokinar Corporation d1 d2 N(d1) N(d2) Call Price Put Price
The current price of a non- dividend paying stock is $38.52. Use a two-step tree to value a European call option on the stock with a strike price $32.3 that expires in 12 months. The risk free rate is 9.9% per annum, and the volatility is 28.1 % . What is the option price?
Suppose XYZ stock pays no dividends and has a current price of $50. The forward price for delivery in 1 year is $55. Suppose the 1-year eective annual interest rate is 10%. (a) Graph the payo and prot diagrams for a forward contract on XYZ stock with a forward price of $55. (b) Is there any advantage to investing in the stock or the forward contract? Why? (c) Suppose XYZ paid a dividend of $2 per year and everything else stayed the same. Now is there any advantage to investing in the stock or the forward contract? Why?
Give typing answer with explanation and conclusion The stock of Nugent Nougats currently sells for $46 and has an annual standard deviation of 47 percent. The stock has a dividend yield of 5.6 percent and the risk-free rate is 5.6 percent. What is the value of a call option on the stock with a strike price of $42 and 44 days to expiration?
If a particular stock does not pay dividends and is currently priced at $24 per share, what should be the price of a call option with a maturity of one year and a strike price of $24.5 if put options with the same features currently cost $2? Assume a risk free rate of 2%. (use 5 decimal places)
Shopify, Inc common stock currently sells for $1,229.91 per share, and the standard deviation of returns is 58.67%. A call option with a strike price of $1,100 is currently trading on the market. The option expires in 0.15 years, and the risk-free rate of return is 0.9%. Shopify does not pay a dividend. What is rho (ρ) for this call option assuming a continuous model such as the Black-Scholes model? A) 104.1327 B) 107.2895 C) 57.7772 D) 107.0002

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