Explanation:
Using the normal distribution table,
Using the normal distribution table,
c_0 = (\`$24` \times 0.9099) - (\`$22` \times e^{-(0.0375 \times 0.75)} \times 0.8944) = \`$21.84` - \`$19.13` = \`$2.71`(Book 4, Module 61.2, LO 61.d)
Ultimate access to all questions.
Use the following information to answer the next two questions.
The current market price for one share of Kalen Ltd. (KLT) is $24. A call option exists on Kalen with an exercise price of $22 per share that expires in nine months. The continuously compounded risk-free rate is 3.75%, and the annualized standard deviation of returns is 10.25%.
Partial Cumulative Normal Distribution Table
0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
1.2 0.8869 0.8888 0.8907 0.8925 0.8944 0.8962 0.8980 0.8997 0.9015
1.3 0.9049 0.9066 0.9082 0.9099 0.9115 0.9131 0.9147 0.9162 0.9177
1.4 0.9207 0.9222 0.9236 0.9251 0.9265 0.9279 0.9292 0.9306 0.9319
0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
1.2 0.8869 0.8888 0.8907 0.8925 0.8944 0.8962 0.8980 0.8997 0.9015
1.3 0.9049 0.9066 0.9082 0.9099 0.9115 0.9131 0.9147 0.9162 0.9177
1.4 0.9207 0.9222 0.9236 0.9251 0.9265 0.9279 0.9292 0.9306 0.9319
Question 23 of 100
Using the information above, what is the value of the KLT European call option?
A
$1.25.
B
$1.34.
C
$1.93.
D
$2.71.
No comments yet.