The spot price of XYZ plc is 394.5p, with a standard deviation of 20 per cent. A

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The spot price of XYZ plc is 394.5p, with a standard deviation of 20 per cent. A call option on the stock expires in 219 days, and it has a strike price of 400p, with a quoted price of 18p. The risk-free rate is 1 per cent.

(a) Find the Black–Scholes value of the call.

(b) Why does the Black–Scholes value not match the quoted price of the call?

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Corporate Finance

ISBN: 9780077173630

3rd Edition

Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe

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Question Posted: Feb 22, 2024 03:03 AM

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The spot price of XYZ plc is 394.5p, with a standard deviation of 20 per cent. A

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a BlackScholes Value of the Call To calculate the BlackScholes value of the callwe need to gather the following information Spot price S 3945p Strike ...View the full answer

Corporate Finance

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