FIN 516 Week 3 Homework

Course: FIN 516 Advanced Managerial Finance Institution: DeVry Contributor: Amanda Format: DOCX/PPTX Pages: 4

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Week 3 Homework OPTIONS We are given the following information: Call optionMarket Price = $7Stock Price = $30 / shareStrike Price = $25 / share What is the exercise value of the call option? Exercise Value = MAX[ current price of stock – strike price, 0]30 – 25 = 5 What is the option’s time value? Time value = Market price (strike price) – Exercise Value 7 – 5 = 2 8-3 BLACK-SCHOLES MODEL We are given the following information: Current Price 15 Strike Price 16 Risk Free Rate 6% Time 6months (.5) Std Dev ? Variance .12 In order to find the Std. Dev you have to find the square of the v

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