Question

Suppose you own a call option on a stock for which the following applies: Underlying stock’s...

  1. Suppose you own a call option on a stock for which the following applies:

Underlying stock’s price = $50

Strike price = $49

Risk-free rate =6% (cont. compounded)

Time to expiration on the option = 4 months

Variance of the underlying stock’s return = 0.0169

Find the value of the call and put options using the BSM model.

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