Question

1a. For a stock trading at $50 with 15% volatility and 2% risk free interest rate, find the prices of a one month put and call options with a strike price of $50.

b. Determine the effect on both the put and call of increasing the strike price to $55

c. Determine the effect of doubling the time to maturity

Answer 1

PFA....
Wer will save this question with the help of Black schales model I Value of call - Pa N (di)- option et Pe N (da) e at where, ܫܫܢܫܝܚܣܦܝܕܩܠ ܠܥܢܢܝܠܐ di = In (Palee) + (or +0.5st 2 da = di sut Pa = current price of underlying asset = risk free rate of interest to t = time until enginy of option in years e = 2118208 (the imponential Constant) In the natural Leganteras Pe-it = PV of enercise price calculated by using continuous diassunting price discounting price N(d) = equals the area under the normal curre up to a (refer to manal distiluution tables نوعیمیلمهلهههنلنلملم دم hall option Value of put option using => pe caPat pe to et

Current Excercise puce (pa) - $50 puce (Pe) = $50 انحله فوح کا Time = 1 month a 0. 083 yrs After pulling formula he dained : the values in the pallowing things dl= de = 0.060 0.017 Nasz ost 0.0239 0.5239 Nda= o.st o.0040 = 0, soyo. And my this value of call we will option get the $0.91 of value of put optian C- Pa Xpe xeit T By the putting value the of values we put option will get $ 0.82

Note I have not shokun Weasy. Just put hewe waliond PAR NO. Intend to SSS peeling the values into the -2.14 0ے اععحمه فلفلل ومیدیا وہ Amand w from os. eet distutution Sale و پیلا ريح منهو معمه که وقتييا of care option $ 0.01 value of put oplion $4.92. And W ou the dime is doubled which meand time is 2 months lie, 0,17 . I have calculated the value of care and put price using the strike price which gets us to with di = 0.085 kn - dz20.024 By inserting the values into fomula me will get valt al cos Taill get value of call option & 1.30