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The stock price of a company is currently $75 per share. A call option on the...

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Finance

The stock price of a company is currently $75 per share. A calloption on the company’s stock has an exercise price of $80 and sixmonths to expiration. The continuous riskfree rate is 5% per yearand the stock's volatility is 28% per year.

A.) Use the Black-Scholes formula to find the value of the calloption.

B.) Calculate the hedge ratio for the call option.

Answer & Explanation Solved by verified expert
3.7 Ratings (430 Votes)
a We use BlackScholes Model to calculate the value of the call options The value of a call option is C S0 Nd1 Kert Nd2 where S0 current spot price K strike price Nx is the    See Answer
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