Exam 13: Valuing Stock Options: the Bsm Model

When the non-dividend paying stock price is $20, the strike price is $20, the risk-free rate is 6%, the volatility is 20% and the time to maturity is 3 months, which of the following is the price of a European call option on the stock?

Which of the following is a way of extending the Black-Scholes-Merton formula to value a European call option on a stock paying a single dividend?

A stock provides an expected return of 10% per year and has a volatility of 20% per year. What is the continuously compounded expected return in one year?

What is the number of trading days in a year usually assumed for equities?

The risk-free rate is 5% and the expected return on a non-dividend-paying stock is 12%. Which of the following is a way of valuing a derivative?

A stock price is $100. Volatility is estimated to be 20% per year. What is an estimate of the standard deviation of the change in the stock price in one week?

When there are two dividends on a stock, Black's approximation sets the value of an American call option equal to which of the following?

Which of the following is NOT true?

When the non-dividend paying stock price is $20, the strike price is $20, the risk-free rate is 5%, the volatility is 20% and the time to maturity is 3 months, which of the following is the price of a European put option on the stock?

The volatility of a stock is 18% per year. What is the volatility per month?

Which of the following is assumed by the Black-Scholes-Merton model?

Which of the following is true when there are dividends?

Which of the following is measured by the VIX index?

What does N(x) denote?

The original Black-Scholes and Merton papers on stock option pricing were published in which year?

When the Black-Scholes-Merton and binomial tree models are used to value an option on a non-dividend-paying stock, which of the following is true?

A stock price is 20, 22, 19, 21, 24, and 24 on six successive Fridays. Which of the following is closest to the volatility per annum estimated from this data?

What was the original Black-Scholes-Merton model designed to value?

An investor has earned 2%, 12% and -10% on equity investments in successive years (annually compounded). This is equivalent to earning which of the following annually compounded rates for the three year period.

Which of the following is a definition of volatility?