September 2023 Exercise 2 Construct the following table and make a chart which shows the call price and intrinsic value S

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September 2023 Business & Finance Assignment

 

Exercise #2        
    Construct the following table and make a chart 
    which shows the call price and intrinsic value.
           
S 50 Current stock price      
X 50 Exercise price      
T 0.50000 Time to maturity of option (in years)      
r 10.00% Risk-free rate of interest      
Sigma 25% Stock volatility      
           
d1 0.3712 <– (LN(S/X)+(r+0.5*sigma^2)*T)/(sigma*SQRT(T))      
d2 0.1945 <– d1-sigma*SQRT(T)      
           
N(d1) 0.6448 <– Uses formula NormSDist(d1)      
N(d2) 0.5771 <– Uses formula NormSDist(d2)      
           
Call price 4.79 <– S*N(d1)-X*exp(-r*T)*N(d2)      
Put price 2.35 <– call price – S + X*Exp(-r*T):  by Put-Call parity      
  2.35 <– X*exp(-r*T)*N(-d2) – S*N(-d1):  direct formula      
           
      Stock Call Intrinsic
      price price value
           
      43   0
      45   0
      47   0
      49   0
      50 4.79112 0
      51   1
      53   3
      55   5
      57   7
      59   9
      61   11
      63   13