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    Call option & Put option values

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    8-1
    A call option on Bedrock Boulders stock has a market price of $7. The stock sells for $30 a share and the option has an exercise price of $25 a share.
    a. What is the exercise value of the call option?
    b. What is the premium on the option?

    8-3

    Assume that you have been given the following information on Purcell Industries.
    Current Stock price=$15 Strike price of option =$15
    Time to maturity of option =6 mos Risk-free rate =6%
    Variance of stock return=0.12
    d1 = 0.24495 N(d1) =0.59675
    d2 = 0.00000 N(d2)= 0.50000
    According to the Black-Scholes option pricing model, what is the options' value?

    8-4

    The current price of a stock is $33, and the annual risk-free rate is 6%. A call option with an exercise price of $32 and one-year until expiration has a current value of $6.56.
    What is the value of a put option written on the stock with the same exercise price and expiration date as the call option?

    8-6
    The current price of a stock is $20 . In 1 year, the price will be either $26 or $16. The annual risk -free rate is 5%. Find the price of a call option on the stock that has a strike price of $21 and that expires in 1 year. (Hint: Use daily compounding.)

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    Solution Summary

    Assume that you have been given the following information on Purcell Industries.
    According to the Black-Scholes option pricing model, what is the options' value?

    $2.19

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