skip to Main Content
The smarter way
to do assignments.

Please note that this is just a preview of a school assignment posted on our website by one of our clients. If you need assistance with this question too, please click on the Order button at the bottom of the page to get started.

BLACK-SCHOLES MODEL An analyst is interested in using the Black-Scholes model to value call options on the stock of Ledbetter Inc. The analyst has accumulated the following information:The price of the stock is $33.The strike price is $33.The option matures in 6 months (t = 0.50).The standard deviation of the stocks returns is 0.30, and the variance is 0.09.The risk-free rate is 10%.Given that information, the analyst is able to calculate some other necessary components of the Black-Scholes model:d1= 0.34177d2= 0.12964N(d1) = 0.63369N(d2) = 0.55155N(d1) and N(d2) represent areas under a standard normal distribution function. Using the Black-Scholes model, what is the value of the call option?
Black Scholes Model(BSM) equation is given by, Value of Call option = Price of stock*N(d1) – (Exercise Price*N(d2)) / e^rt where,e^rt = e^0.10*0.50 =e^0.05 =1.05127 (as per the value in the table for…

e^x) Therefore,Value of call option = 33*0.63369 -(33*0.55155)/1.05127 =20.91177-18.20115/1.05127 =20.91177-17.313487 =3.5982 (Ans)

GET HELP WITH THIS ASSIGNMENT TODAY

Clicking on this button will take you to our custom assignment page. Here you can fill out all the additional details for this particular paper (grading rubric, academic style, number of sources etc), after which your paper will get assigned to a course-specific writer. If you have any issues/concerns, please don’t hesitate to contact our live support team or email us right away.

How It Works        |        About Us       |       Contact Us

© 2018 | Intelli Essays Homework Service®