Investments Quiz 6 | Massachusetts Institute of Technology - Edubirdie

University:
Massachusetts Institute of Technology
Course:
15.501/516 | Accounting
Academic year:

2023
Views:

164

Pages:

1
Author:

Brozzagce

Quiz # 6 European Call Option using Black-Scholes/Merton Consider a European call option on a stock when there are ex-dividend dates in two months and five months. The dividend on each ex-dividend date is expected to be 0.$ 50. The current share price is $50 and the strike price is $50. The stock price volatility is 20% per annum and the risk free rate is 8.329% per annum, the volatility is continuously compounded, the interest rate is a simple interest rate, the time to maturity is six months. Calculate the call option's price and delta using Black-Scholes/Merton. (Reminder: Showing the essential steps along the way will enhance your chances of partial credit in case you make an error.)1 1 This question is taken from a former midterm exam. It was worth 25% of the entire midterm.

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