Build a Model-Ch 08 P08
Adams Nigel (Not rated)
(Not rated)
Fall 1, 2012 | |||||||||||||||
Chapter 8. Ch 08 P08 Build a Model | |||||||||||||||
Except for charts and answers that must be written, only Excel formulas that use cell references or functions will be accepted for credit. | |||||||||||||||
Numeric answers in cells will not be accepted. | |||||||||||||||
You have been given the following information on a call option on the stock of Puckett Industries: | |||||||||||||||
P = | X = | ||||||||||||||
t = | rRF = | e-rRFt = | |||||||||||||
s = | |||||||||||||||
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. | |||||||||||||||
Hint: use the NORMSDIST function. | |||||||||||||||
(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 | = |
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