Rebecca is interested in purchasing a European call on a hot new stock, Up, Inc. The call has a strike price of $ 100.00 and expires in 86 days. The current price of Up stock is $ 123.61, and the stock has a standard deviation of 43 % per year. The risk-free interest rate is 6.79 % per year. Up stock pays no dividends. Use a 365-day 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.
(Note : Make sure to round all intermediate calculations to at least five decimal places. )
a. Using the Black-Scholes formula, compute the price of the call.
The price of the call is
$nothing.
(Round to two decimal places.)
b. Use put-call parity to compute the price of the put with the same strike and expiration date.
The price of the put is
$nothing.
(Round to two decimal places.)