A stock is selling today for $110. The stock has an annual volatility of 64 percent and the annual risk-free rate is 7 percent. a. Calculate the fair price for a 1 year European call option with an...

A stock is selling today for $110. The stock has an annual volatility of 64 percent and the annual

risk-free rate is 7 percent.

Calculate the fair price for a 1 year European call option with an exercise price of $95.

b. Calculate how much the current stock price would need to change for the purchaser of

the call option to break even in one year.

Calculate the fair price for a 1 year European put option with an exercise price of $95.

d. Calculate how much the current stock price would need to change for the purchaser of

the put option to break even in one year.

e. Calculate the level of volatility that would make a $95 call option sell for $30. (Use Goal

Seek or Solver).

Calculate the level of volatility that would make a $95 put option sell for $8. (Use Goal

Seek or Solver).

Please show work using excel

Jun 01, 2022

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