You are a junior investment banking analyst working with Silver Bags. Your boss has asked you find the value for European put option using the Black Scholes valuation approach. The data for the stock is as follows: The annual mean return for the stock is 10%, and the annual standard deviation is 30%. The current stock price is $100 and the strike price is $95. The risk-free rate is 3% per year and the option has maturity of two years. The stock pays no dividends.

Please find the theoretical price of the option.

Answer rating: 100% (QA)

ANSWER The theoretical price of the option is 767 This is calculated using the Black Scholes formula ... View the full answer