Problem regarding the option valuation

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Reference no: EM131064360

Option Valuation

Rebecca is interested in purchasing a European call on a hot new stock, Up, Inc. The call has a strike price of $100 and expires in 90 days. The current price of Up stock is $120, and the stock has a standard deviation of 40% per year. The risk-free interest rate is 6.18% per year.

a. Using the Black-Scholes formula, compute the price of the call.

b. Use put-call parity to compute the price of the put with the same strike and expiration date.

Reference no: EM131064360

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