Question: You ve just been introduced to the Black Scholes option pricing model
You’ve just been introduced to the Black-Scholes option pricing model and want to give it a try, and would like to use it to calculate the value of a call option on TriHawk stock. Currently, TriHawk’s common stock is selling for $25.00 per share, and the call option you are considering has an exercise or strike price of $20.00 with a maturity of 90 days or .25 year. In addition, you have calculated the (annualized) variance in its stock returns to be .09. If the risk-free rate of interest is 4 percent, what would the value of this call option be? How would your answer change if there was only one month left to expiration, but everything else remained the same? Now, what would happen to the value of this call option if the annualized variance in stock returns was .15 rather than .09?
Relevant QuestionsLast year Sanderson, Inc. had sales of $3 million. The firm’s cost of its goods sold came to $2 million, operating expenses excluding depreciation of $100,000 were $400,000, and the firm paid $150,000 in interest on its ...A scrambled list of accounts from the income statement and balance sheet of Belmond, Inc. is as follows:Inventory ................ $ 6,500Common stock .............. 45,000Cash .................. 16,550Operating expenses ...Use the common-size financial statements prepared for Study Problem to respond to your boss’s request that you write up your assessment of the firm’s financial condition. Specifically, write up a brief narrative that ...Last year the P. M. Postem Corporation had sales of $400,000, with a cost of goods sold of $112,000. The firm’s operating expenses were $130,000, and its increase in retained earnings was $58,000. There are currently ...Marx and Winter, Inc. operate a chain of retail clothing stores throughout the U.S. Midwest. The firm recently entered into a loan agreement for $20 million that carries a floating rate of interest equal to LIBOR plus 50 ...
Post your question