Build a Model 11/26/18 Chapter: 8 Problem: 8 You have been given the following information on a call option on the stock of Puckett Industries: P = $65 X = $70 t = 0.5 rRF = 5% s = 0.50 a. Using the Black-Scholes Option Pricing Model, what is the value of the call option? First, we will use formulas from the text to solve for d1 and d2. Call Option Price (c) = N(d1) *S*exp(-ST)- N(d2) *K*exp(-rT) d1=(In(P/K)+(r-S+02/2)*T)/o*sqrt(T) d2= d1- a*sqrt(t) N(d1) = Probability that normally distributed variable will have probability less than d1 N(d2) = Probability that normally distributed variable will have probability less than d2 Hint: use the NORMSDIST function. { ln (P/X) + [rRF + s2/2) ] t } / (s t1/2)2 (d1) = N(d1) = (d2) = N(d2) = Using the formula for option value and the values of N(d) from above, we can find the call option value. VC = b. Suppose there is a put option on Puckett's stock with exactly the same inputs as the call option. What is the value of the put? Put option using Black-Scholes modified formula = Put option using put-call parity =How do you do the problems in excel?