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Draw the payoff picture at expiration for a long position

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Reference no: EM132393520

1. What is the value of the following call option according to the Black Scholes Option Pricing Model? What is the value of the put options?

Stock Price = $42.50

Strike Price = $45.00

Time to Expiration = 3 Months = 0.25 years.

Risk-Free Rate = 3.0%.

Stock Return Standard Deviation = 0.45.

2. Draw the payoff picture at expiration for a long position in a call option that has a premium of $1.75 and a strike price of $55.

3. Draw the payoff picture for a short position in the call option given in Problem 2.

4. Draw the payoff picture at expiration for a long position in a put option that has a premium of $2.50 and a strike price of $65.

5. Draw the payoff picture for a short position in the put option given in Problem 4.

(I would of broke them up as questions but the questions built off each other.)

Reference no: EM132393520

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