Question

Use the Black-Scholes option pricing model for the following problem. Given: stock price=$60, exercise price=$50, time to expiration=3 months, standard deviation=35% per year, and annual interest rate=6%.No dividends will be paid before option expires. What are the N(d1), N(d2), and the value of the call option, respectively?

Answer #1

Use Black-Scholes model to price a European call option
Use the Black-Scholes formula to find the value of a call option
based on the following inputs. [Hint: to find N(d1) and N(d2), use
Excel normsdist function.] (Round your final answer to 2
decimal places. Do not round intermediate
calculations.)
Stock price
$
57
Exercise price
$
61
Interest rate
0.08
Dividend yield
0.04
Time to expiration
0.50
Standard deviation of stock’s
returns
0.28
Call value
$

Excel Online Structured Activity: Black-Scholes Model
Black-Scholes Model
Current price of underlying stock, P
$33.00
Strike price of the option, X
$40.00
Number of months unitl expiration
5
Formulas
Time until the option expires, t
#N/A
Risk-free rate, rRF
3.00%
Variance, σ2
0.25
d1 =
#N/A
N(d1) =
0.5000
d2 =
#N/A
N(d2) =
0.5000
VC =
#N/A

Use the Black-Scholes option pricing model for the following
problem. Given: SO = $80; X =
$80; T = 80 days; r = 0.06 annually (0.0001648
daily); s = 0.020506 (daily). No dividends will be paid before
option expires. Find the value of the call option?

1. Calculate the value of the D1 parameter for a call option in
the Black-Scholes model, given the following information: Current
stock price: $65.70 Option strike price: $74 Time to expiration: 7
months Continuously compounded annual risk-free rate: 3.79%
Standard deviation of stock return: 22%
2. Calculate the value of the D2 parameter for a call option in
the Black-Scholes model, given the following information: Current
stock price: $126.77 Option strike price: $132 Time to expiration:
6 months Continuously compounded...

In addition to the five factors, dividends also affect the price
of an option. The Black–Scholes Option Pricing Model with dividends
is:
C=S×e−dt×N(d1)−E×e−Rt×N(d2)C=S×e−dt×N(d1)−E×e−Rt×N(d2)
d1=[ln(S/E)+(R−d+σ2/2)×t](σ−t√)d1= [ln(S /E ) +(R−d+σ2/2)×t ] (σ−t)
d2=d1−σ×t√d2=d1−σ×t
All of the variables are the same as the Black–Scholes model
without dividends except for the variable d, which is the
continuously compounded dividend yield on the stock.
A stock is currently priced at $88 per share, the standard
deviation of its return is 44 percent...

7. Use the Black -Scholes formula to find the value of a call
option on the following stock:
Time to expiration = 6 months
Standard deviation = 50% per year
Exercise price = $50 Stock price = $50
Interest rate = 3%
Dividend = 0
8. Find the Black -Scholes value of a put option on the stock in
the previous problem with the same exercise price and expiration as
the call option.
NEED HELP WITH NUMBER 8

. Use the Black-Scholes model to find the price for a call
option with the following inputs: (1) current stock price is $45,
(2) exercise price is $50, (3) time to expiration is 3 months, (4)
annualized risk-free rate is 3%, and (5) variance of stock return
is 0.50.
. Using the information from question above, find the value of a
put with a $50 exercise price.

Black-Scholes Model
Assume that you have been given the following information on
Purcell Industries:
Current stock price = $15
Strike price of option = $14
Time to maturity of option = 9 months
Risk-free rate = 6%
Variance of stock return = 0.13
d1 = 0.52119
N(d1) = 0.69888
d2 = 0.20894
N(d2) = 0.58275
According to the Black-Scholes option pricing model, what is the
option's value? Do not round intermediate calculations. Round your
answer to the nearest cent. Use...

This question refers to the Black-Scholes-Merton model of
European call option pricing for a non-dividend-paying stock.
Please note that one or more of the answer choices may lack some
mathematical formatting because of limitations of Canvas Quizzes.
Please try to overlook such issues when judging the choices.
Which quantity can be interpreted as the present value of the
strike price times the probability that the call option is in the
money at expiration?
Group of answer choices
Gamma
K∙e^(rT)∙N(d2)
Delta...

Working with the Black-Scholes model and a call option for a
particular stock, you calculate the following values:
d1 = 0.73
d2=0.58
N(d1)= 0.85
N(d2) = 0.57
C0 = 3.46
Given the information that you have, what is the best estimate
as to what the new call price would be if shares of the underlying
stock increased by $0.24?
For this question, you do not need to calculate any of the
Black-Scholes equations to solve for d1, d2,
or C0

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