### Use the black-scholes model to find price for call option

Assignment Help Financial Management
##### Reference no: EM131303393

1. Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is \$28, (2) strike price is \$35, (3) time to expiration is 2 months, (4) annualized risk-free rate is 6%, and (5) variance of stock return is 0.31. Round your answer to the nearest cent. In your calculations round normal distribution values to 4 decimal places.

2. The current price of a stock is \$21. In 1 year, the price will be either \$27 or \$15. The annual risk-free rate is 6%. Find the price of a call option on the stock that has a strike price is of \$25 and that expires in 1 year. (Hint: Use daily compounding.) Round your answer to the nearest cent. Assume 365-day year. Do not round your intermediate calculations.

3. The current price of a stock is \$16. In 6 months, the price will be either \$19 or \$11. The annual risk-free rate is 3%. Find the price of a call option on the stock that has a strike price of \$14 and that expires in 6 months. (Hint: Use daily compounding.) Round your answer to the nearest cent. Assume a 365-day year. Do not round your intermediate calculations.

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