Suppose you have a call option on a stock with a strike price of $22. A)...
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Suppose you have a call option on a stock with a strike price of $22. A) Fill in the stock price and strike price in the table and calculate the exercise value (B) Plot the Stock price on the xaxis and the Exercise value on the yaxis. Be sure to label both axes with titles and include a chart title. Now assume you have the following data for a call option: Current stock price Strike price Time to expiration Risk  free rate Stock return standard deviation $65.00 $70.00 10 4.0% 35.00% C) Fill in the components of the BlackScholes model and calculate d 1 and d 2 D) Calculate the value of N(d 1 ) and N(d 2) using the Excel function and find the value of VC Now use the binomial option pricing model in conjunction with the following data to value a call option: Current stock price, P = $27.00 Riskfree rate, r RF = 5% Strike price, X = $25.00 Up factor for stock price, u = 1.41 Down factor for stock price, d = 0.71 Years to expiration, t = 0.50 E) Calculate the stock price using the binomial model and find the option payoff in each case, in addition to the value of NSF) Calculate the portfolio payoff in each case and find the present value of the payoff, in addition to the value of the call option
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Related Book For
Fundamentals of Corporate Finance
ISBN: 9781118845899
3rd edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
Posted Date:
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