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The ASX200 Share Price Index (SPI) stands at 6,200 and has a volatility (standard deviation)...

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Finance

The ASX200 Share Price Index (SPI) stands at 6,200 and has a volatility (standard deviation) of 25% per annum. The risk-free rate of interest is 3% p.a. and the index provides a dividend yield of 4% p.a. (all rates are continuously compounded). If an option on the SPI is for $25 x SPI, use the appropriate formula to calculate the value of a six-month European call with an exercise price of 6,000.

[Show all calculations, explicitly identifying the value of d1 and d2.]

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