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A stock currently trades at $40. The continuously compounded risk-free rate of interest is 7%, and...

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Finance

A stock currently trades at $40. The continuously compoundedrisk-free rate of interest is 7%, and the volatility of the stockreturn is 35%. Use the Black-Scholes formula to compute each of thefollowing (round each answer to the nearest penny). a) The price ofa 0.25-year European call option, struck at $45. Price = $ .------------------- b) The price of a 0.25-year European putoption, struck at $45. Price = $ .----------------------

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d1 lnS0X tr q 22 t12 ln4045 025007 03522 03502512 00850 01750    See Answer
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A stock currently trades at $40. The continuously compoundedrisk-free rate of interest is 7%, and the volatility of the stockreturn is 35%. Use the Black-Scholes formula to compute each of thefollowing (round each answer to the nearest penny). a) The price ofa 0.25-year European call option, struck at $45. Price = $ .------------------- b) The price of a 0.25-year European putoption, struck at $45. Price = $ .----------------------

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