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Rebecca is interested in purchasing a European call on a hot new? stock, Up, Inc. The...

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Question

Finance

Rebecca is interested in purchasing a European call on a hotnew? stock, Up, Inc. The call has a strike price of

$ 95.00

and expires in

89

days. The current price of Up stock is

$ 118.73

and the stock has a standard deviation of 45%

per year. The? risk-free interest rate is 6.94%

per year. Up stock pays no dividends. Use a? 365-day year.

a. Using the? Black-Scholes formula, computethe price of the call.

b. Use? put-call parity to compute the price ofthe put with the same strike and expiration date.

?(Note?: Make sure to round all intermediate calculations toat least five decimal places.?)

?

Answer & Explanation Solved by verified expert
3.9 Ratings (653 Votes)
a Price of call option can be calculated by using BlackScholesformula in following manner INPUTSOutputsValueStandard deviation Annual 4500d1119071Time until    See Answer
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Transcribed Image Text

Rebecca is interested in purchasing a European call on a hotnew? stock, Up, Inc. The call has a strike price of$ 95.00and expires in89days. The current price of Up stock is$ 118.73and the stock has a standard deviation of 45%per year. The? risk-free interest rate is 6.94%per year. Up stock pays no dividends. Use a? 365-day year.a. Using the? Black-Scholes formula, computethe price of the call.b. Use? put-call parity to compute the price ofthe put with the same strike and expiration date.?(Note?: Make sure to round all intermediate calculations toat least five decimal places.?)?

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