Purchase Solution

Applying the Black-Scholes Model

Not what you're looking for?

Ask Custom Question

The current stock price of Johnson and Johnson is $64 and the stock does not pay dividends. The instantaneous risk free rate of return is 5%. The instantaneous standard deviation of J&J's stock is 20%. You wish to purchase a call option on this stock with an exercise price of $55 and an expiration date 73 days from now.

Using the Black-Scholes OPM, what should the call option be worth today?

Purchase this Solution
Solution Summary

Solution describes the steps to calculate value of call option by using Black Scholes model.

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

View More Free Quizzes
Related BrainMass Solutions

  • Black Scholes: value of a call option on Kellogg

    on the Kellogg Company, and the ten year average annual return on 10-year treasury constant maturity rate bonds and applying the Black-Scholes option pricing model, the value of a call option on Kellogg stock with a given exercise price and maturity

  • Calculate NPV and Apply Black-Scholes Model

    144990 Calculate NPV and Apply Black-Scholes Model Need help calculating the NPV and applying Black-Scholes model to estimate value of option. Please explain how to complete each step and calculate the answers.

  • Question about Value of Call Option using Black-Scholes model

    192746 Question about Value of Call Option using Black-Scholes model An analyst is interested in using the Black-Scholes model to value call options on the stock of Ledbetter Inc.

  • Black-Scholes Model

    This solution is comprised of step-by-step calculation of the value of an option using the Black-Scholes Model.

  • Black Scholes Merton Model

    Please find tutorial and help for Black Scholes Merton Model in the attached file. Black Scholes Merton Model is illustrated in this tutorial.

  • Black-Scholes Option Pricing Model

    is the value of a 9-month call given the Black-Scholes Option Pricing Model

  • Financial Options and Applications

    Using the Black- Scholes model, what is the value of the call option?

  • Black-Scholes Option Pricing Model.

    137737 Black-Scholes Option Pricing Model. What is the value of a 9-month call with a strike price of $45 given the Black-Scholes Option Pricing Model and the following information?

  • Black-Scholes valuation model-call option

    Using the Black-Scholes valuation model, what is the price of a European-style call option under these conditions? b) Assume that the stock in the previous problem pays a dividend twice in the life of the option.

View More Related Solutions