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Contemporary Engineering Economics 6th Edition by Chan Park
Edition 6ISBN: 978-0134162690Contemporary Engineering Economics 6th Edition by Chan Park
Edition 6ISBN: 978-0134162690 Exercise 7
Consider the following purchasing options on Facebook (FB) stock.
• The current price to buy one share of Facebook stock is $76.33.
• The stock does not pay dividends.
• The risk-free interest rate, compounded continuously, is 6%.
• A European call option on one share of FB stock with a strike price of K that expires in one year costs $12.
• A European put option on one share of FB stock with a strike price of K that expires in one year costs $9.45.
Determine the strike price, K, if the volatility is estimated to be 35.85%.
• The current price to buy one share of Facebook stock is $76.33.
• The stock does not pay dividends.
• The risk-free interest rate, compounded continuously, is 6%.
• A European call option on one share of FB stock with a strike price of K that expires in one year costs $12.
• A European put option on one share of FB stock with a strike price of K that expires in one year costs $9.45.
Determine the strike price, K, if the volatility is estimated to be 35.85%.
Explanation
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A put option is a security or collateral...
Contemporary Engineering Economics 6th Edition by Chan Park
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