Rebecca is interested in purchasing a European call on a hot new? stock, Up, Inc. The...

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Finance

Rebecca is interested in purchasing a European call on a hotnew? stock, Up, Inc. The call has a strike price of
$ 95.00
and expires in
89
days. The current price of Up stock is
$ 118.73
and the stock has a standard deviation of 45%
per year. The? risk-free interest rate is 6.94%
per year. Up stock pays no dividends. Use a? 365-day year.
a. Using the? Black-Scholes formula, computethe price of the call.
b. Use? put-call parity to compute the price ofthe put with the same strike and expiration date.
?(Note?: Make sure to round all intermediate calculations toat least five decimal places.?)
?

Answer & Explanation Solved by verified expert

3.9 Ratings (653 Votes)

a Price of call option can be calculated by using BlackScholesformula in following manner INPUTSOutputsValueStandard deviation Annual 4500d1119071Time until See Answer

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Transcribed Image Text

Rebecca is interested in purchasing a European call on a hotnew? stock, Up, Inc. The call has a strike price of$ 95.00and expires in89days. The current price of Up stock is$ 118.73and the stock has a standard deviation of 45%per year. The? risk-free interest rate is 6.94%per year. Up stock pays no dividends. Use a? 365-day year.a. Using the? Black-Scholes formula, computethe price of the call.b. Use? put-call parity to compute the price ofthe put with the same strike and expiration date.?(Note?: Make sure to round all intermediate calculations toat least five decimal places.?)?