A stock currently trades at $40. The continuously compounded risk-free rate of interest is 7%, and...
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A stock currently trades at $40. The continuously compoundedrisk-free rate of interest is 7%, and the volatility of the stockreturn is 35%. Use the Black-Scholes formula to compute each of thefollowing (round each answer to the nearest penny). a) The price ofa 0.25-year European call option, struck at $45. Price = $ .------------------- b) The price of a 0.25-year European putoption, struck at $45. Price = $ .----------------------
A stock currently trades at $40. The continuously compoundedrisk-free rate of interest is 7%, and the volatility of the stockreturn is 35%. Use the Black-Scholes formula to compute each of thefollowing (round each answer to the nearest penny). a) The price ofa 0.25-year European call option, struck at $45. Price = $ .------------------- b) The price of a 0.25-year European putoption, struck at $45. Price = $ .----------------------
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A stock currently trades at $40. The continuously compoundedrisk-free rate of interest is 7%, and the volatility of the stockreturn is 35%. Use the Black-Scholes formula to compute each of thefollowing (round each answer to the nearest penny). a) The price ofa 0.25-year European call option, struck at $45. Price = $ .------------------- b) The price of a 0.25-year European putoption, struck at $45. Price = $ .----------------------
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